US crude hit a record $92.22 a barrel before edging lower to $91.17 a barrel, still up 71 cents from the previous close.

It is closing in on its inflation-adjusted high of $101.70 seen in April 1980. London Brent crude was up 42 cents at $87.90.

Oil''s bullish momentum has been aided by fresh US sanctions on Iran, the world''s fourth biggest oil exporter for the alleged spreading of weapons of mass destruction.

Meanwhile, an attack on a Nigerian oil rig operated by Italian firm ENI shut 50,000 barrels per day of production.

Oils gains were also aided by a weak dollar, which drove prices of dollar-denominated commodities higher. The dollar hit fresh record lows against the euro and a basket of currencies in anticipation that the US Federal Reserve may cut interest rates next week.

While oil surged 50 per cent in dollar terms since the start of the year, prices rose 38 per cent in terms of euros.

Since mid-August, when the US Federal Reserve cut interest rates, oil has climbed 30 per cent. Traders are, in fact, betting on further rises in oil prices. Oil futures are expected to move above $1100 a barrel, according to market analysts.

However, a slowdown in global growth rates is sure to arrest an oil price rally. Already, there are some indications of a slowdown in China''s demand growth, another big driver of oil''s rally.