* One of the worst Gaza tunnel accidents
* Call for Hamas to supervise the operation
* Israel permits first fuel shipment in months
GAZA, July 27 At least seven Palestinians were killed overnight when fuel exploded in a smuggling tunnel beneath the border between Egypt and the Gaza Strip, Palestinian officials in Gaza said on Monday.
The accident was one of the worst on record in the dangerous and illicit Gaza tunnel network.
Officials said the explosion and fire were caused by an electrical spark. More dead may be buried at the scene, the officials added. But they gave no figure.
Smuggling of all sorts of goods, from livestock to diesel oil, is both an essential and a profitable enterprise for Gaza, an enclave blockaded by Israel, whose Islamist rulers Hamas are pledged to continue armed resistance to the Jewish state.
Israel says Hamas also imports weapons, explosives and ammunition via the tunnels, which are dug by hand and privately run but ultimately under the control of Hamas.
Hamas seized control of the Gaza Strip from the dominant Palestinian Fatah group in 2006 after Israel unilaterally withdrew from the territory in 2005.
The network numbered several hundred tunnels along the border strip at Rafah by late December 2008, when the Israeli armed forces launched an offensive against Gaza that included aerial bombing of the tunnels.
Israel's stated goal was to end Hamas rocket fire into the towns and territory of southern Israel.
Many tunnels were destroyed during three weeks of bombing, but quickly reconstructed later to meet the demands of trade.
Hamas wants Israel to open border crossings to normal trade, but Israel rejects any such agreement until Hamas releases Gilad Shalit, an Israeli soldier kidnapped three years ago.
Officials say 107 Palestinians have been killed in the tunnels since the beginning of the year, prompting one Gaza leader to call for an end to the deaths.
Jamil Majdalawi of the Popular Front for the Liberation of Palestine PFLP urged Hamas to supervise the tunnel business.
"We are in need of some of what comes through these tunnels and we have repeatedly asked for a rationalisation of this operation, organising it so that it answers to the necessities of the people, not a beast that swallows their souls and their money for the sake of some greedy people."
Monday's accident coincided with Israel's first permitted shipment of fuel for private use into Gaza for 10 months -- 100,000 litres of diesel and 40,000 litres of gasoline. (Reporting by Nidal al-Mughrabi, writing by Douglas Hamilton; editing by Alison Williams)