The firefighters had brought the blaze under control, but "excessive heat" led to reignition at the tank around 4.30 am today, the official said.
According to officials, the fire had broken out around 5 pm yesterday when Mumbai and the surrounding areas witnessed thundershowers. However, no causality was reported.
"Excessive heat caused reignition around 4.30 am today. Firefighting as well as the cooling operations are on. Foam and other extinguishing agents are being used for the purpose," Mumbai fire brigade chief PS Rahangdale said.
He said firefighters of MbPT as well as the fire brigade team are working in tandem to douse the blaze.
"There has been a good coordination between Mumbai fire brigade personnel and the MbPT fire service team. The fire brigade team had reached around 10 feet near the blaze-hit tank, but reignition at dawn has posed a new challenge before us. However, the blaze is under control," he said.
"I am monitoring the operation. Because of the heat, the foam (used as an extinguisher) is not settling down, this is causing reignition. But overall, the situation is under control," Mr Rahangdale said but did not specify how long the firefighting operation would continue.
Butcher Island houses a marine oil terminal of MbPT.
Oil tankers discharge crude at the terminal, and it is transported to refineries at nearby Mahul through submerged pipelines, port officials said.
After the fire broke out, vessels in the vicinity of the island have been moved to a distance as a precautionary measure.
A BPCL spokesperson had said yesterday that a lightning strike amid thundershowers was the apparent cause behind the fire. "A diesel tank caught fire due to the lightning and thundershowers," he had said.
Manohar Rao, executive director and head of safety, BPCL, had said that prima facie, the cause of the fire was lightning, though further probe will be carried out on Saturday.