Oil yesterday recoiled towards $68 in preparation for another attack on its $70 record, powered by supply threats in Iran, Nigeria and Iraq and strong demand in the United States and China.

Strong investment fund buying had earlier pushed London Brent crude to an all-time high of $69.70. US crude had swept to a session high of $69.45.

"It is pretty clear that we can break $70 without too much problem," said Deborah White, an analyst at SG CIB in Paris.

"We have been getting a massive injection of invest-ment fund money in the energy markets. It is very clear from the price action that they haven't stopped."

US crude was later down 74 cents at $68, while London Brent was down 36 cents at $68.39. Oil has climbed 13 per cent since January 1, extend-ing a rally that began at the start of 2002 with oil at $20 a barrel. Investment money has poured into commodities.

"The ultimate deterrent for the oil market is when the price becomes too expensive for people to fill their tanks," said Ian Henderson, fund manager at JP Morgan Fleming.

"I think they will continue to carry out their travel plans even with oil prices as high as $100 a barrel."

The world's economies are racing ahead despite energy costs at their highest in real terms for a quarter of a century. US oil contracts for June onwards are already trading above $70, suggesting few traders expect the price to come off suddenly.

"With the US and global economies still showing strong signs of resilience, expectations for oil demand growth in 2 006 and 2007 remain robust," Deutsche Bank said in a research note.

"The United States and China account for a substantial proportion of the total world oil growth in 2006 and 2007."

Concerns over supplies from OPEC producers Iran, Nigeria and Iraq have been a big factor in oil's rally in recent months.

Iran is at odds with the W est over its atomic programme, rebels have knocked out nearly a quarter of Nigeria's output and Iraq's exports are at their lowest since the US-led invasion.

Former Iranian President Akbar Hashemi Rafsanjani yesterday told Kuwait's KUNA news agency that Iran had begun producing enriched uranium - a direct challenge to the United States and the United Nations' nuclear agency.

US President George W. Bush has dismissed reports of plans for military strikes on the world's fourth biggest oil exporter as "wild speculation" but the market remains nervous.

"The market is not really factoring in the true impact of military action but the mere mention of it sends prices higher," said Gerard Burg, economist at the National Australia Bank.

With the loss of gasolinerich Nigerian oil set to encroach on the American summer driving season, traders are nervously eyeing fall-ing fuel supplies, hit by high demand and extensive refinery maintenance to comply with cleaner US fuel standards.