A surprise drop in stockpiles and concerns over winter supplies have pushed oil to a new record of $96 a barrel.

It is the second consecutive week that the US Energy Information Administration has reported a sharp drop in oil inventories.

Oil could hit $100 a barrel during the next week if price increases continue at their current rate.

Crude prices have reached inflation-adjusted highs set in early 1980.

The weak dollar has also played a part in oil's price rise. Investors want a hedge against the weak currency.

The pound was close to the 2.08 dollars mark today following yesterday's cut in US interest rates.

The ongoing political tension between Turkey and Iraq has fueled the rise in the oil price. There have also been recent concerns about intermittent violence in Nigeria posing a threat to the country's main oil producing region.

This has been exacerbated by the US government's tough stance last week against Iran, the world's fourth largest oil producer.