Oil held above $78 a barrel on Wednesday, close to its record high, after OPEC's modest output increase failed to allay fears over stock levels during the coming winter.

U.S. light crude for October delivery was 7 cents higher at $78.30 a barrel by 8:15 a.m. EDT, after coming within a whisker of August 1's record high of $78.77 on Tuesday.

London Brent crude was up 4 cents at $76.42.

OPEC agreed to raise crude output by 500,000 barrels per day (bpd) from November 1 at its meeting in Vienna on Tuesday, in a gesture to consumer nations concerned about the economic impact of high oil prices and rapidly diminishing fuel stocks.

The OPEC outcome was not enough of a shocker to turn around a market that likes to read extremes, said Olivier Jakob of oil consultancy Petromatrix.

The new output deal from the Organization 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 bpd above their nominal ceiling.

OPEC had to balance consumers' concerns about shrinking supplies ahead of winter with fears of an economic slowdown in top consumer the United States that could dampen oil demand.

OPEC member Iraq is excluded from the production agreement, as is new member Angola.

We think that OPEC has been somewhat less aggressive in its additional supply decision as it waits to see if Iraq can sustain a 250 million barrel per day flow from the north, Jakob said.

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 on Wednesday, also suggested high prices might further curb consumption.

The agency, adviser to 26 industrialized countries, said it was too early to assess the impact of fallout from the mortgage crisis in the U.S. on its economy.

The latest snapshot of U.S. oil inventories is due later on Wednesday, when the Energy Information Administration publishes weekly data.

Crude oil stocks are likely to have fallen by 2.4 million barrels last week, according to a Reuters survey of industry analysts.

(Reporting by Annika Breidhardt and Maryelle Demongeot)