Petrol prices have broken through the £1 a litre for the first time, it emerged today as oil prices moved ever closer to the $100 a barrier on mounting concerns about a winter fuel supply shortage and the weakening US dollar.

The AA said unleaded petrol averaged 100.08p yesterday - 13 per cent higher than at the start of the year - while diesel hit 103.32p.

More than 2,500 petrol stations across the UK are already charging more than £1 a litre for unleaded given the spiralling crude oil price.

The breakthrough came as the oil price topped $98 a barrel in early morning trading with US light, sweet crude for December rising to a new record of $98.03. London Brent crude also hit a new peak of $94.57, up $1.31 a barrel as Asian investors took advantage of the weakening dollar to buy oil.

The oil price has been marching toward the $100 point since mid-August, when investors began buying oil as a shelter from the US subprime mortgage crisis and sliding dollar.

Prices have climbed by almost $30 a barrel since then and analysts believe that it is only a matter of time before the symbolic $100 level is reached.

Dariusz Kowalczyk, chief investment strategist at CFC Seymour, told Reuters that $100 a barrel seemed inevitable. “I think we’ll get there,” he said. “The factors that have been driving the recent trend are still in place.”

A weekly US inventory report, out later today, is also expected to show that crude stocks in the world’s biggest energy consumer have fallen due to disruptions to Mexican imports, adding to fears over supplies ahead of the winter.

The US Energy Information Administration alerted investors to low winter supplies yesterday, saying stocks in industrialised nations would drop some 20 million barrels below the five-year average by the end of this year amid robust demand and continued caps on output from producer-group OPEC.

The EIA, the statistical wing of the Department of Energy, also sharply raised its forecast for US oil prices in 2008 to near $80 a barrel from its prior projection of $73.50.

Concerns over winter fuel supplies were also raised due to storms in the North Sea yesterday, which forced ConocoPhillips to say that it may have to shut down five of its 16 oil platforms on its 236,000 barrel per day (bpd) offshore Ekofisk field.

Rising prices were further supported by the weakening dollar, which makes oil more affordable for buyers in other currencies. The US dollar hit another low against the euro at $1.4666. Continuing problems in the global credit market have maintained the pressure on the dollar, as investors scent another Federal Reserve rate cut.

The pound went above the psychologically important $2.10 mark against the dollar, for the first time in more than sixteen years.

Speculation that China could be set to diversify its reserves away from the dollar has sent the currency plunging to its current level. This follows comments by vice chairman of China’s National People’s Congress Cheng Siwei, who said the country’s forex regulator will “shift” its foreign exchange holdings, and that China should consider shifting its forex reserves to “stronger” currencies.

Positive consumer confidence figures from the UK have also helped the pound against the dollar. Nationwide’s figures showed that consumer confidence dipped only marginally in October despite the recent financial market turmoil.

Oil’s gains picked up momentum on Wednesday after the U.S. dollar hit another low against the euro at $1.4666 with global credit market turmoil keeping expectations of another Federal Reserve rate cut alive.

The Organization of the Petroleum Exporting Countries, from which more than a third of the world’s oil comes, has agreed to raise production by 500,000 barrels a day from 1 November, but has been unwilling to increase production further, blaming speculators and politics for the recent price rally.

Analysts have also said that big options positions in the $90 to $100 range may also be forcing investors to cover short positions, contributing to the rise toward an all-time inflation-adjusted high of $101.70 during April 1980. “We see a number of speculative and technical factors as critical drivers of the latest oil price rally,” Jan Stuart, UBS oil analyst, said in a note.

On a more positive note, BP said its Texas refinery would reach near full output at the end of 2007. The refinery has been undergoing a $1 billion renewal programme, which has taken more than two years. It has been running under capacity following a blast that killed 15 people in March 2005.

The company said the Texas plant was on track to reach its full-capacity target of 437,000 barrels a day in the first half of 2008.

Stock markets across Asia were mixed in late trade on Wednesday. The Hang Seng held up as oil majors gained but benchmarks in Japan, South Korea and Singapore turned lower, on fears that the high oil price would depress US consumer spending power.

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