Energy ministers from the OPEC group of oil exporting countries, meeting in Beirut, have agreed to raise oil output by two million barrels a day, or 8%.
Oil reached its highest prices for two decades and there had been widespread calls from industrialised countries for OPEC to increase production to prevent damage to the world economy.
Crude oil prices are now reported to have dropped back on news of the agreement.
However, the Kuwaiti Oil Minister, Sheikh Ahmad al-Fahd al-Sabah, said the deal would not come into effect until 1 July. He said there will be a further increase of output of 2% in August.
Yesterday, some OPEC members said they would step up production but insisted they were not to blame for the current situation.
Analysts say the continuing uncertainty over possible terrorist attacks in Saudi Arabia is a significant factor in the recent price increases.
