Oil hits record near $127 as Iran mulls output cut

By Matthew Robinson

NEW YORK (Reuters) - Oil surged to a record peak near $127 on Tuesday after OPEC producer Iran said it was studying a plan to cut output despite signs record-high prices are hurting consumer nations.

U.S. crude settled up $1.57 to $125.80 a barrel, after striking a record $126.98 earlier. London Brent crude rose $1.19 to $124.10 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.

"There has been such a proposal and it is under expert review," Fars quoted Ahmadinejad as saying when asked about the possibility of the world's No. 4 producer reducing output.

Iranian Oil Minister Gholamhossein Nozari earlier said Iran was reviewing how much oil it pumps, but no decision had been taken on any changes.

"We're in a market where anything bullish is going to be able to push the price higher," said Peter Beutel, president of Cameron Hanover.

Oil prices have already surged sixfold since 2002 as supply has struggled to keep pace with booming demand from emerging economies.

Further support came from tight global supplies of distillate fuels such as diesel after a snag at the Grangemouth refinery in Scotland.