Fears of an oil shock deepened on Friday as crude set new highs, underpinned by fresh evidence of strong Chinese demand and worries about sabotage in Iraq.

News of an explosion at the Whiting, Ind., refinery also helped push U.S. front-month September light crude to a record $46.65 a barrel on the New York Mercantile Exchange (search), before closing at $46.58, up $1.08, or 2.4 percent, on the day.

London Brent also marched into record territory, touching $43.92 a barrel before settling up $1.59 at $43.88. Oil prices have set new records in all but one of the last 11 trading sessions.

Worries about possible unrest in oil producer Venezuela during this weekend's referendum on the rule of President Hugo Chavez (search) helped fuel Friday's gains, analysts said.

"None of the fears about supply have gone away and demand growth shows no sign of slowing," said independent oil analyst Geoff Pyne in London. "That makes it a difficult market to sell."

"You've got Iraq along with the referendum in Venezuela on Sunday," said Nauman Barakat of brokers Refco in New York. "It's one problem after the other. I don't see anything bearish in this market."

Oil is up more than $10 a barrel since the start of the year. In real terms, adjusted for inflation, prices are still well below 1980's peak of $80, following the Iranian revolution. But prices have surpassed those of 1974, the first oil shock, when crude averaged an inflation-adjusted $43 during the Arab oil embargo.

While leading economies so far have managed to cope with higher prices, signs are emerging that rising energy costs are starting to bite.

The chief economist of Germany's central bank said oil was dampening the country's economic outlook and persistently high prices could force a downgrade in the bank's upbeat forecasts for growth and inflation.

Bundesbank chief economist Hermann Remsperger told Welt am Sonntag newspaper: "Further increases in oil prices would not only dampen global growth, but (German) purchasing power too."

Meanwhile, a blast on Friday at the 420,000-barrel-a-day BP Whiting refinery, the U.S.' third biggest, underlined the fragility of a refinery system that is struggling to meet national consumption growth rates of 3.5 percent. U.S. refinery bottlenecks are seen as a prime factor behind this year's price surge.

China on Friday said crude imports into the world's second biggest oil consumer held strong in July at growth rate of 40 percent over July 2003. China's crude imports averaged 2.49 million bpd in the first seven months of 2004, also up 40 percent compared to the same period a year ago, said official news agency Xinhua.

OPEC is already pumping at 25-year-high of 30 million bpd in a bid to replenish world oil inventories before the winter demand period of the fourth quarter.

Deborah White, senior economist at SG Commodities in Paris, said demand for OPEC crude would reach 30.3 million bpd in the fourth quarter, leaving no room for supply disruptions in Iraq.

Iraqi oil exports flowed normally on Friday from the country's southern fields to offshore terminals after pumping resumed through a key pipeline sabotaged on Monday, said an official from Iraq's South Oil Co.

But traders worry that Iraqi rebels loyal to Shi'ite Muslim cleric Muqtada al-Sadr (search) will target oil industry infrastructure after U.S. forces stormed the holy city Najaf (search) to quell a week-long uprising by Sadr supporters.

There were also concerns that Sunday's referendum in Venezuela may lead to violence if President Hugo Chavez is defeated and the country's oil shipments are put at risk.

"What we have right now is nearly the perfect storm — hurricanes in the Gulf of Mexico, YUKOS, Iraq pipeline attacks, strong world demand keeping spare barrels rare," said Roger Tissot, a director of the Washington-based PFC Energy.