Oil prices dip amid G8 warning on sky-high crude

World oil prices fell further on Tuesday as leaders of the Group of Eight rich nations warned on soaring crude costs and appealed for more production to dampen the market.

Brent North Sea oil for August delivery slid 45 cents to 141.42 dollars a barrel in electronic deals.

New York's main oil contract, light sweet crude for August delivery, shed 32 cents to 141.05 dollars.

"It seems to me like oil traders are looking with some interest at the headlines coming out of the G8 meeting," said Dave Ernsberger, Asia director of global energy information provider Platts in Singapore.

The London Brent contract hit an all-time peak of 146.69 dollars and New York crude struck a record high of 145.85 dollars last Thursday.

Soaring oil and food prices pose a "serious challenge" to stable worldwide economic growth, Group of Eight (G8) leaders from Britain, Canada, France, Germany, Italy, Japan, Russia and the United States warned on Tuesday.

At their meeting in Japan, they also called for an increase in oil production and refining capacity to help stem soaring prices.

"The G8 leaders are clearly trying to talk this market down," Ernsberger added.

Oil had slumped on Monday, losing almost four dollars in New York, on the back of easing geopolitical tensions over Iran's nuclear program and a strengthening US dollar.

However, jitters about key crude producer Iran returned to haunt the market on Tuesday.

Iran would "set on fire" Israel and the US navy in the Gulf as its first response to any American attack over its nuclear programme, an aide to supreme leader Ayatollah Ali Khamenei warned on Tuesday.

"The first US shot on Iran would set the United States' vital interests in the world on fire," said Ali Shirazi, a mid-ranking cleric who is Khamenei's representative to the naval forces of the elite Revolutionary Guards.

"Tel Aviv and the US fleet in the Persian Gulf would be the targets that would be set on fire in Iran's crushing response," he said, according to the Fars news agency.

The United States and its top regional ally Israel have never ruled out attacking Iran over its nuclear drive, which the West fears could be aimed at making nuclear weapons.

There has been concern an attack against Iran could be imminent after it emerged Israel had carried out manoeuvres in Greece that were effectively practice runs for a potential strike against Iranian nuclear facilities.

Shirazi said that "the Zionist regime is pressuring the White House leaders to plan a military assault on Iran" and Iran would react "if they commit such a stupidity."

Crude futures had scaled record heights last week owing to simmering tensions over Iran, the weak US dollar and tightening global supplies, traders said.