* IAEA says deal with Iran near, easing supply disruption fear
* Prices slip as investors doubt outcome of EU summit
* World Bank cuts China economic growth forecast
Oil fell on Wednesday on growing hopes of a deal between Iran and the United Nations nuclear watchdog, which eased fears of oil supply disruption, while concerns over the debt crisis in the euro zone and a slowing Chinese economy weighed on demand.
The U.N.'s International Atomic Energy Agency expects to sign a deal with Iran soon to unblock investigations suspected work on nuclear bombs in the oil-producing country.
This improved the prospects for talks with Tehran to stop a drift towards conflict.
Brent crude fell $1.27 to $107.14 per barrel. U.S. crude fell 96 cents to $90.89.
Brent crude oil has fallen from a peak of $128.40 at the start of May and is down 12.9 percent this quarter, its biggest such drop since the fourth quarter of 2008.
Analysts said they believe there is scope for fresh weakness.
"The Iranians seem to be softening their position and that could lead to an easing of sanctions," said Christopher Bellew at Jefferies Bache.
"If that were to happen, oil might fall below $100 while Saudi Arabia decides whether to cut production."
Saudi Arabia is the world's largest exporter and favours an oil price of around $100
Economic concerns also weighed on oil as the World Bank cut its economic growth forecast for China, the world's second-largest oil consumer.
Nagging fears of a messy Greek exit from the euro zone also remained ahead of a Wednesday meeting of European leaders.
Negative data in Britain also added to the gloom, with the biggest ever drop in fuel sales contributing to a sharp fall in retail sales.
The fears helped push the dollar to a 20-month high against a basket of currencies, making oil priced in other currencies less affordable.
Germany has dismissed a French-led call for euro zone governments to issue common bonds, cooling hopes the meeting will produce fresh measures to tackle the region's debt problems.
"The selling will stop when the market is convinced that the uncertainty surrounding Greece and the rest of the sovereign debt issues in Europe are truly over and the macroeconomic data starts to improve," said Dominick Chirichella of New York's Energy Management Institute.
The World Bank warned that Europe's seething debt crisis could inflict even bigger damage if it worsens, with sluggish U.S. and European demand and a softening Chinese property market combining to weigh on the Chinese economy in the near term.
It also cut its economic growth forecast for China this year to 8.2 percent from 8.4 percent previously, adding that a slowing China will drag growth in emerging East Asia to two-year lows this year.
U.S. crude oil inventories rose 1.5 million barrels last week, industry group the American Petroleum Institute said in a report on Tuesday, further hurting oil prices.
Crude stocks were expected to have risen 1.0 million barrels last week, a Reuters survey of analysts showed.
The U.S. department of energy inventory report is due on Wednesday at 1430 GMT.
Europe is also facing a glut of high quality crude oil grades, only a year after Libya created a serious shortage, as the continent's demand falls and the United States cuts imports due to greater domestic supply.