Oil prices jumped near $80 a barrel today, propelled by an unexpectedly large drop in US crude oil stocks.
US light crude for October delivery was up $1.66 to a record $79.89 a barrel this evening after setting a record high of $79.89 a barrel earlier in the day.
London Brent was up $1.34 cents at $77.72.
Despite the surge in oil prices the cost of petrol will remain stable, according to the AA.
The weak dollar, which today hit a record low against the euro, and the end of the US driving season are expected to offset the higher oil prices.
Last month petrol prices were an average of 116.9 cent in Ireland. The AA says there will not be any significant move in prices.
OPEC agreed to raise crude output by 500,000 barrels per day from November 1 at its meeting in Vienna yesterday, in a gesture to consumer nations concerned about the economic impact of high oil prices and rapidly diminishing fuel stocks.
The new output deal from the Organisation of the Petroleum Exporting Countries will reverse most of the 1.7 million barrels per day of cuts agreed by the group since October 2006.
The 10 countries bound by that agreement were already pumping almost one million barrels a day above their nominal ceiling.
OPEC had to balance consumers' concerns about shrinking stocks of oil ahead of winter with fears of an economic slowdown in the US that could dampen oil demand.
'With this move, the supplier is signalling 'we think there may be a supply shortage', not just the consumers,' said Tobin Gorey, a commodities strategist at Australia's Commonwealth Bank.
'But with the US dollar so low, $78 now is not what $78 was a month ago,' he added.
OPEC member Iraq is excluded from the production agreement, as is new member Angola.
The International Energy Agency, which has been urging OPEC to pump more oil, predicted world oil demand will grow more slowly than expected in the last quarter of 2007 and next year.
The IEA's latest monthly report, published this morning, also suggested high prices might further curb consumption.
The agency, adviser to 26 industrialised countries, said it was too early to assess the impact of fallout from the mortgage crisis in the US on its economy.