Although the exact cause of the accident is unknown, officials said the blast was caused by careless welding near the tanker.
About 31 people had died at the scene while another three had succumbed to their injuries after arriving at Herat hospital, a humanitarian worker said.
Twenty-six people were being treated for burns while other casualties were being dealt with at a clinic in Shindand, said spokeswoman for French non-governmental organisation Medecins du Monde France, Valerie Gentner.
A statement from the office of President Hamid Karzai confirmed that at least 25 people had died and more than 40 were injured in the tragedy.
Azizabad lies on the Kandahar-Herat highway linking the main southern city with the prosperous north-west capital of Herat which borders Iran and Turkmenistan.
