Oil prices have risen to fresh record highs for the seventh trading day in a row, as the effects of a weak US dollar overshadowed an increase in US reserves of crude.

US crude struck a new high of $111 a barrel, a gain of more than $1 on the day. London Brent crude also hit a new peak at $107.88.

The dollar dropped to a 12-year low against the yen and a record low against the euro earlier on increasing fears about the US economy and credit markets.

Investors have rushed into commodities to hedge against inflation and the softening dollar. That has contributed to oil's rally, despite concerns that a slump in the US would hit demand.

Oil prices rebounded after a drop on Wednesday caused by US government data that showed crude stocks rose more than expected last week.

Meanwhile, the price of gold has soared to a record high $1,000.45 an ounce, as the precious  metal benefited from the weak dollar and its safe-haven status amid fears of rising inflation.