UPDATE 5-Oil near $122, looks to US supplies

                                
 * Oil near $122, after touching 12-week low on Tuesday
                                
 * Reuters poll sees rise in US gasoline, distillates stocks
                                
 * Iran to continue nuclear path - supreme leader
                                
 
                                
 (Updates prices, adds details on Iran)
                                
 By Alex Lawler
                                
 LONDON, July 30 (Reuters) - Oil eased below $122 a barrel on
Wednesday before the release of U.S. government data expected to
show rising fuel inventories and weak demand in the world's
largest consumer.
                                
 U.S. gasoline inventories are expected to rise by 200,000
barrels and distillates by 1.9 million barrels, according to a
Reuters poll ahead of the data due later on Wednesday. Crude
stocks are expected to fall. [EIA/S]
                                
 "The U.S. inventory data will determine whether oil has the
legs to test sub-$120 or stage a rebound," said Rob Laughlin,
broker at MF Global.
                                
 "I suggest the market can and should move lower in the short
term, but be prepared for a bounce along the way."
                                
 U.S. crude <CLc1> fell 52 cents to $121.67 a barrel by 1243 
GMT. It fell as low as $120.42 on Tuesday, the lowest since May
6. European benchmark Brent <LCOc1> was off 40 cents at $122.31.
                                
 A cut to supply in Nigeria earlier this week and tension
over Iran's nuclear programme limited oil's decline. Iran is the
second-largest producer in the Organization of the Petroleum
Exporting Countries.
                                
 Iran will pursue its nuclear path, the country's highest
authority, Supreme Leader Ayatollah Ali Khamenei, said on
Wednesday, speaking just before a deadline set by world powers
in the dispute.
                                
 Western powers gave Iran two weeks from July 19 to respond
to their offer to hold off on imposing more U.N. sanctions on
Iran if Tehran would freeze any expansion of its nuclear work.
                                
 In Nigeria, Africa's top oil producer, Royal Dutch Shell
declared force majeure on Bonny Light exports after militants
blew up parts of a key pipeline earlier this week.
                                
 Oil has slid from a record high of $147.27 on July 11, the
steepest drop from a high since early 2007, pressured by signs
that costly fuel and an economic slowdown are curbing demand,
especially in the United States.
                                
 The Energy Information Administration, which later on
Wednesday issues its weekly inventory report, on Monday said
U.S. oil demand in May was 660,000 barrels per day less than
previously thought.
                                
 The dollar was up slightly on Wednesday. A stronger dollar
can reduce the appeal of oil and commodities to some investors
playing the negative correlation between the markets in recent
months.
 (Additional reporting by James Topham in Tokyo, editing by
James Jukwey)