Oil resumed its upward march on Thursday, its sights set on a new record high above $89 that would deepen economic worries in the United States and unease among some OPEC producers.

Prices had dipped earlier in the session on a combination of profit-taking and after Nigeria's energy minister raised the possibility OPEC may review output as early as next month to try to cool a market it believes is behaving irrationally.

But losses were short-lived and by 10:44 a.m. EDT U.S. crude was up $1.38 at $88.78 a barrel. It briefly hit an all-time high of $89 on Wednesday in a rally that added almost $10 in eight days.

London Brent was up 88 cents at $84.01.

Nigeria's minister of state for petroleum told Reuters on Wednesday he did not rule out that OPEC ministers may turn informal talks at an OPEC heads of state summit in Riyadh in mid-November into a full-blown meeting to review output.

But on Thursday an Iranian official insisted there was no need for OPEC to boost production further, having agreed to add 500,000 barrels per day to the market from November 1.

Geopolitics is the reason behind very high oil prices, said the official from OPEC's second biggest producer. Bringing calm to the international situation would help the price.

Oil has surged 45 percent since the start of the year, moving towards its April 1980 inflation-adjusted high of $101.70, according to International Energy Agency data.

That year -- a year after the Iranian revolution and at the start of the Iran-Iraq year -- oil averaged $90.46.

This year's average is $67.27.


The rally has accelerated this month as central banks pumped money into financial markets to keep them operating smoothly through a global credit squeeze.

A greater liquidity boom in Asia, created by lower interest rates, is helping fuel the demand for commodities, said Francisco Blanch, head of commodity research for Merrill Lynch.

It's a record high, but which commodity isn't at a record high? I'm not sure it's that high a number relative to other commodities...It's probably a fundamental shift in the price of commodities in the world, said Peter Bosworth, chief executive of trading house Arcadia.

Investors and analysts also cite relatively low oil stocks in consumer nations, unprecedented weakness in the dollar and the prospect Turkey will send troops into northern Iraq to hunt down Kurdish rebels there.

Although little oil is at risk from any military action by Turkey in northern Iraq -- Iraq's exports via its pipeline to Turkey have been sporadic since 2003 -- traders fear a conflict could endanger other supplies from the Middle East.

Signs of slowing demand in top consumer the United States were a tempering factor on Thursday, however. U.S. data on Wednesday showed year-on-year growth of just 0.2 percent.

U.S. Energy Secretary Sam Bodman said high prices were of great concern to the United States, whose economy is facing headwinds from the meltdown in the subprime mortgage market.

With prices pushing towards $90, and $100 being bandied about as another likely target, both OPEC and the United States are under increasing pressure to try to talk the market down, said Edward Meir, an analyst at MF Global.

(Additional reporting by Jonathan Leff and Barbara Lewis)