OIL fell yesterday, edging away from record highs near US$127 a barrel after Iran assured it had no plans to cut exports and US inventory showed a rise in supplies of distillates.

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

"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. ID:nL13937955

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.

A top Iranian official said on Wednesday Tehran was continuing sell oil to international customers as usual and has no plans to cut exports to world markets. nSP17893

"There is no plan to cut exports and we keep our promises (to clients) ... and we export as usual," said Hojjatollah Ghanimifard, executive director of international affairs at National Iranian Oil Company.

Tensions between Tehran and the West over Iran's nuclear program have supported prices over the past year.