The incident came with prices already on the boil because of supply concerns in major oil producing countries Iran and Nigeria, violence in the Middle East and strong global demand.
British energy giant British Petroleum said that it had started shutting down the Prudhoe Bay oil field in Alaska after discovering severe corrosion on a pipeline and a small spill.
The US Department of Energy (DoE) said it would be receptive to any requests from refiners to tap into the nation's emergency oil reserve, amid fears the incident could cut daily US oil output by as much as eight percent.
In London, the price of Brent North Sea crude for September delivery shot up to its new peak at 1705 GMT. It later settled at US$78.30 a barrel, up US$2.13 from Friday's settlement.
New York's main contract, light sweet crude for delivery in September, surged 2.22 dollars to close at US$76.98 a barrel. It remains a little way off its record of 78.40 dollars registered on July 13.
"I am beginning to think BP stands for big problems. Better hang on to your hat, as a BP pipeline leak in Alaska could spell big problems for the world oil market," said Alaron Trading analyst Phil Flynn.
The shutdown in Alaska will slash BP's US production by 400,000 barrels per day (bpd), a significant amount at a time of global tensions and tight supplies.
Prudhoe Bay accounts for about half of Alaska's total output and around eight percent of total production in the United States, according to the DoE.
BP's president of exploration in Alaska, Steve Marshall, said it would take between three and five days to completely shut down the oilfield.
The company would not commit to a date when it would seek to resume operations.
Reserve could be tapped
The US Department of Energy said that it would take a "serious look" at requests from refiners to tap the US Strategic Petroleum Reserve, which was last opened after devastating hurricanes last summer.
Global Insight analyst Simon Wardell said that while it would be some time before output was restarted, "the worst-case scenario appears to be a matter of weeks rather than months".
"Fortunately this comes at a time when US crude oil inventories are in very good shape," James Williams at WTRG Energy Economics said.
"Gasoline stocks are also higher than normal in the West (of the United States), which adds a little to the cushion," he said.
West-coast refineries use about 2.8 million barrels per day. So the Prudhoe Bay loss represents about 15 percent of normal input for the region, Mr Williams said.
Analysts said the shutdown came at a bad time for the oil market, with prices already being pushed higher by the Israeli offensive against Hezbollah militants and threats to Nigeria's oil industry.
The nuclear energy crisis in Iran, the world's fourth-biggest crude producer, was adding further upward pressure to prices.
The Islamic republic faces a UN deadline to halt uranium enrichment by August 31 or have sanctions imposed. Traders say sanctions might lead to severe disruptions to global oil supplies.
In Nigeria, Africa's biggest oil exporter, attacks on oil facilities and personnel by separatist militants have risen in the Niger Delta region, cutting Nigerian oil exports by 30 percent since January.
Finally, market participants were also monitoring hurricane threats in the US Gulf of Mexico, where many oil and gas platforms are located.
Aussie motorists eye $1.50 litre
Meanwhile Australian motorists are being warned not to expect any relief at the petrol pump in the near future, with prices tipped to rise further, possibly exceeding $1.50 a litre next week.
Motoring group NRMA says Australian motorists may even be paying up to $1.80 a litre within months, if the current tensions in the Middle East continue.
Fuel-price monitor FuelTrac's general manager Geoff Trotter said he expects petrol pump prices in metropolitan capitals excluding Queensland, to reach a high of 145.9 cents this week, and possibly to exceed 150 cents next week, compared to a high of 143.2 cents in Sydney and Canberra last week.
"The most recent news hasn't really filtered through yet," said Mr Trotter, referring to a production outage at a major Alaskan field as well as political tension in the Middle East.
"It is a significant loss of capacity (in Alaska) and we've already seen a sharp reaction in world crude oil prices, which is predictable, and that will flow on to Australian pumps in the next 10 to 14 days," Service Station Association chief executive Ron Bowden told AAP.