"We have a slight negative risk coming from higher oil prices, which affects our forecast," said Gerassimos Thomas, spokesman for EU Economic Affairs Commissioner Joaquin Almunia.

He said that if oil rates remained at their current levels in excess of 40 dollars a barrel and the euro contined to trade at around 1.22 dollars, growth in the eurozone would be reduced by 0.2 percentage points from the commission's current prediction of 1.7 percent this year.

The projection was made on the assumption of oil selling at 31 dollars a barrel.

Thomas said with oil above 40 dollars a barrel inflation in the 12-nation eurozone would likely be 0.2 points higher than the expected 1.8 percent.

"An oil price increase is something which certainly concerns the commission but it isn't causing alarm bells to ring," he added.

Meanwhile AFP from London says,

World oil prices soared by over a dollar a barrel on Tuesday as fears of disruption to supplies from Saudi Arabia intensified after an attack by suspected Al-Qaeda militants.

The price of benchmark Brent North Sea crude oil for delivery in July jumped by 1.25 dollars to 37.85 dollars in the first few minutes of trading.

New York's reference light sweet crude for July delivery climbed by 1.03 dollars to 40.91 dollars in out-of-hours electronic dealing.

Both markets had been closed on Monday for a public holiday.

Prices gushed higher after 22 people, including 19 foreigners, were killed in a weekend attack and hostage taking at oil company offices and a housing complex in the eastern Saudi city of Al-Khobar.

The Al-Khobar attack was the second in a month on a hub of the oil industry in Saudi Arabia.