May 13 (Bloomberg) -- Crude oil and heating oil climbed to records on signs that refiners are not meeting demand for distillate fuels such as diesel and heating oil.

Supplies of distillates in developed countries fell 6.7 percent to 477.6 million barrels in March from last year, according to International Energy Agency estimates. Prices also rose because Iranian President Mahmoud Ahmadinejad told the state-run Fars news agency that Iran was reviewing oil output.

``Distillate is carrying the market right now,'' said Sarah Emerson, managing director of Energy Security Analysis Inc., a consulting firm in Wakefield, Massachusetts. ``Latin American demand is up, European supplies are still in deficit and distillate demand is the one area that's stronger here.''

Crude oil for June delivery rose $1.57, or 1.3 percent, to settle at $125.80 a barrel at 2:45 p.m. on the New York Mercantile Exchange. The contract touched $126.98, the highest since trading began in 1983. Prices have more than doubled in the past year.

Heating oil for June delivery climbed 13.91 cents, or 3.9 percent, to settle at a record $3.6989 a gallon in New York. Futures reached $3.7146 an all-time high intraday price. Some traders use heating-oil futures to hedge their diesel and jet- fuel purchases.

Oil Minister Gholamhossein Nozari said earlier today that a decision on cutting production hadn't been made, according to Fars. Nozari was commenting on a report citing an unidentified official as saying Iranian output would be cut by between 400,000 barrels a day and 1 million barrels a day starting next month.

``Such a proposal has been made and is being reviewed by experts,'' Ahmadinejad told Fars, following a conference in Tehran today.

Distillate Fuel

U.S. distillate supplies in the week ended May 2 were 2.6 percent below the five-year average, the Energy Department said May 7. Refiners have struggled to increase diesel output since 2006 when the U.S. Environmental Protection Agency instituted requirements for the fuel to contain less sulfur.

``There's a lot more competition for diesel than we've ever seen,'' said Peter Beutel, president of Cameron Hanover Inc. in New Canaan, Connecticut. ``Everyone is competing for the limited supply. We are exporting record amounts of the fuel.''

The U.S. exported 402,000 barrels of distillate fuel a day in March, the second-highest ever, according to the Energy Department. March is the most recent month for which the department has records.

``There's continuing concern about the global call on distillate fuels,'' said John Kilduff, vice president of risk management at MF Global Ltd. in New York. ``I don't know if we are going to see any actual shortage, but we are sure pricing it that way.''

Supply Declines

The IEA, an energy adviser to 27 nations, said global oil supply averaged 86.8 million barrels a day in April, down 400,000 barrels from March.

The IEA cut its estimate for 2008 global oil demand by about 390,000 barrels a day to 86.84 million barrels. It was the fourth-straight monthly decline. Demand in both China and the Middle East will rise 4.9 percent, more than making up for a drop in consumption from North America and Europe, the agency said.

Brent crude oil for June settlement rose $1.19, or 1 percent, to settle at $124.10 a barrel on London's ICE Futures Europe exchange. The contract touched a record $125.90 on May 9.

OPEC Meeting

The Organization of Petroleum Exporting Countries, responsible for more than 40 percent of the world's oil supply, will hold its next policy-setting meeting in Vienna on Sept. 9. Most members of the 13-nation group have said there is no reason to meet before then because oil supply is sufficient.

An early meeting would help to show that OPEC is also concerned about high prices, IEA Executive Director Nobuo Tanaka said today in Paris.

Gasoline futures for June delivery rose 3.58 cents, or 1.1 percent, to settle at a record $3.20 a gallon in New York after reaching an all-time intraday high of $3.2275 today.

U.S. pump prices followed futures higher. Regular gasoline, averaged nationwide, rose 1.4 cents to a record $3.732 a gallon, AAA, the nation's largest motorist organization, said today.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: May 13, 2008 16:01 EDT