Oil falls on Iran assurance and U.S. distillate build

By Matthew Robinson

NEW YORK (Reuters) - Oil fell on Wednesday, edging away from record highs near $127 a barrel after Iran assured it had no plans to cut exports and U.S. inventory showed a rise in supplies of distillates.

U.S. crude settled $1.58 lower at $124.22, after hitting an all-time high of $126.98 a barrel on Tuesday. London Brent crude settled down $2.24 at $121.86 a barrel.

Oil prices have rallied on concerns about global distillate supplies this month, amid signs of rising diesel demand for power generation in some emerging economies.

Data from the U.S. Energy Information Administration showed a 1.4 million barrel rise in distillate stocks, more than analysts had forecast, helping to ease supply concerns. The rise outweighed a smaller-than-expected build in crude inventories and a steep draw in gasoline supplies.

"Crude runs were up more than expected and imports were down, leading to the small build in crude stocks," said Tim Evans, energy analyst at Citi Futures Perspective.

"The gasoline draw was a bit more than expected on a drop in imports. Overall, this is a mixed set of data, but we'd watch the heating oil price for a reaction to the build."

European middle distillate stocks fell sharply in April to 361.28 million barrels, down 1.4 percent from March and 7.2 percent lower than a year ago, data from industry monitor Euroilstock showed on Tuesday.

Oil prices came under pressure after Iran said it had no plans to reduce supplies to the market. President Mahmoud Ahmadinejad on Tuesday had said the OPEC nation was studying a proposal to cut output, sending prices to new highs.