Oil surged to a record peak near $127 yesterday after Opec producer Iran said it was studying a plan to cut output despite signs record-high prices are hurting consumer nations.

US crude jumped $1.43 to $125.66 a barrel by 12.29 p.m. EDT (6.29 p.m CET), after striking a record $126.98 earlier. London Brent crude rose $1.01 to $123.92 a barrel.

President Mahmoud Ahmadinejad said a proposal to reduce Iran's crude output was being reviewed by experts, the semi-official Fars News Agency reported yesterday.

The International Energy Agency yesterday said record-high oil prices will slow global oil demand growth this year to 1.03 million barrels per day (bpd), 230,000 bpd less than its previous forecast. Despite the loss, the adviser to 27 industrialised countries also said demand growth from emerging countries led by China and the Middle East remained strong.

The US Senate yesterday voted to suspend oil deliveries to the country's Strategic Petroleum Reserve until crude prices fall below $75 a barrel, repudiating the Bush administration's policy of boosting the stockpile at time of record oil and gasoline prices.

Oil prices have surged six-fold since 2002 as supply has struggled to keep pace with booming demand from emerging economies, leading consumer nations to call upon Opec to ramp up production to help ease the sting of high fuel prices.