Oil cartel Organisation of Petroleum Exporting Countries on Wednesday pledged to pump more oil to soothe frayed nerves as oil prices continued to climb in New York and London after reaching new records on Tuesday.
The OPEC move comes in the wake of fears that the world economy could be derailed by higher energy costs, said a report in The Guardian.
The price of the OPEC basket of seven crude oils reached a new record high of $39.33 on Tuesday, a 29 cents rise over Monday's price.
Before this week's surge, the highest price the benchmark basket reached since its inception in 1980, was $38.94 on September 28, 1990 during the Iraqi invasion of Kuwait.
World oil prices, for the first time during the week, dived on OPEC's announcement that it had the capacity to hike production by up to 1.5 million barrels a day. Oil prices also eased after data showed a jump in US gasoline supplies.
New York's benchmark contract, light sweet crude for delivery in September plunged $1.32 to close at 42.83 dollars a barrel. In early Wednesday deals, it had hit an all-time high of $44.34.
Brent North Sea crude for September delivery was down by 94 cents to $39.70. It also had hit a record high of $40.99 a barrel in London trade.
OPEC, which pumps more than a third of the world's oil, is willing to use its spare capacity to lower prices, President Purnomo Yusgiantoro said in a statement on Wednesday.
Opec's spare capacity, which accounts for less than two per cent of current global production is little comfort against any possible supply disruptions due to terrorist activity in the Middle East, or from the Kremlin's battle with Mikhail Khodorkovsky's Yukos.
However, Yukos Oil, Russia's biggest oil exporter, announced on Wednesday, that the government collecting $3.4 billion in back taxes and fines has allowed the company to access accounts used to fund oil production and exports.
Most of OPEC's idle capacity lies in Saudi Arabia, which started pumping at two new fields three months ahead of schedule.
Saudi Arabia, the world's largest oil producer, also announced that it may delay the shutdown of older wells to ease concern over oil supply.
The development of the offshore Abu Safah oil fields and the mostly onshore Qatif fields may boost the nation's output capacity by 800,000 barrels a day, or 8 per cent, once fully commissioned.
Saudi Oil Minister Ali al-Naimi on June 30 had said his nation will take steps to prevent rising oil prices from damaging the world economy.
High oil prices have fuelled concern that energy cost would hurt global economic revival. British treasury officials said Chancellor Gordon Brown remained concerned whether enough oil would be pumped to meet record world demand. The German finance minister, Hans Eichel, said he, too, was concerned about high oil prices. "It could slow world economic growth," he said.
