(Reuters) - Oil prices fell on Tuesday in choppy trading as signs of a deal between the U.N.'s IAEA and Iran on Tehran's nuclear program eased fears of oil supply disruptions, while the unsettled euro zone debt crisis continued to threaten economic growth.

International Atomic Energy Agency's (IAEA) Director General Yukiya Amano said he expected to sign a deal with Iran soon to boost cooperation with the investigation into Tehran's nuclear activity, although differences remained.

Hopes that Wednesday's meeting of European Union leaders will yield fresh action to tackle the region's debt crisis provided an early boost to European and U.S. equities and pressured bond prices on both sides of the Atlantic.

Later, waning optimism about the meeting pushed the euro lower against the dollar. A stronger U.S. currency can pressure dollar-denominated commodities like oil by making them more expensive to consumers using other currencies.

Oil prices also felt pressure from an Organization for Economic Co-operation and Development (OECD) report warning that failure to contain Europe's crisis could derail fragile global growth led by Japan and the United States.

There is perception that Iranians are more agreeable at this point to slowing down its nuclear efforts, but they still have to show some concrete action regarding their nuclear program to justify such hopes, said Gene McGillian analyst at Tradition Energy in Stamford, Connecticut.

Brent July crude slipped 39 cents to $108.42 a barrel by 1:44 p.m. EDT (1744 GMT), after reaching $109.36.

The expiring U.S. June crude contract was down $1.05 at $91.52, having traded from $91.39 to $93.01.

U.S. July crude fell $1 to $91.86 a barrel.

Brent's premium to U.S. crude increased and moved above $16 a barrel based on July contracts, reaching $16.86 intraday.

Trading volume remained lackluster, assisting the choppy trading trajectory. Brent volume was 34 percent below the 30-day average and U.S. turnover was 49 percent under its 30-day average.

Fitch Ratings cut Japan's sovereign credit status weighed on oil futures, coming after both Brent and U.S. crude on Monday snapped a string of lower finishes and closed higher on lift from China's call for more efforts to stimulate growth.

U.S. home resales rose in April to their highest annual rate in nearly two years and a drop in foreclosures pushed prices higher, a report from the National Association of Realtors said, helping to boost housing shares and nudge Wall Street higher.

Less supportive for oil, and U.S. diesel prices in particular, the index tracking tonnage hauled by trucks in the United States slipped in April compared to March, ending seven straight months of gains.

IRAN'S NUCLEAR PROGRAM NEGOTIATIONS

The IAEA's Amano announcement that a deal with Iran was near came a day after holding talks in Tehran.

Israel expressed deep suspicion on Tuesday about the expected deal between the U.N. nuclear agency and Iran, suggesting Tehran's aim was to avoid sanctions rather than make real concessions.

Six major powers are slated to meet Iran on Wednesday in Baghdad to discuss Tehran's nuclear program, but the dispute with the West remains tense and the U.S. Senate approved a package of new economic sanctions on Iran's oil sector on Monday.

The mere possibility of the negotiations failing is keeping markets on their toes, said David Wech from JBC Energy.

U.S. OIL INVENTORIES

Ahead of weekly reports on U.S. oil inventories, commercial crude stocks were expected to have risen last week for the ninth straight week, a Reuters survey of analysts showed.

U.S. crude oil stocks stood above 380 million barrels in the week to May 11, according to the U.S. Energy Information Administration (EIA), putting inventories at their highest since 1990.

Industry group the American Petroleum Institute's inventory report is due at 4:30 p.m. EDT (2030 GMT) on Tuesday, with the EIA report following on Wednesday.

(Additional reporting by Gene Ramos in New York and Dmitry Zhdannikov, Christopher Johnson and Simon Falush in London; Editing by John Picinich)