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UPDATE 5-Oil dips towards $109 on rising supplies, Ukraine supports

* Ukraine peace deal falters as rebels dig in

* U.S. crude prices drop on forecast of stocks build

* Iran nuclear agency reshuffle may pave way for talks

(Recasts, updates throughout, adds quotes)

LONDON, April 22 (Reuters) - Brent oil fell towards $109 a barrel and the U.S. benchmark saw a sharper decline on Tuesday on forecasts of rising crude stocks as a faltering pact to ease tensions in Ukraine offered some support.

Brent crude was down 78 cents at $109.17 a barrel by 1341 GMT, after reaching a six-week high of $110.36 touched last week. U.S. crude slipped $1.62 cents to $102.75 a barrel.

"The supply situation on the oil market remains very good, despite the missing shipments from Libya. This is partly due to higher production in the Gulf states and the U.S., as well as the fact that sanctions against Iran have been eased since November," analysts at Commerzbank said in a note.

Any sharper price decline was halted by lingering concerns over the Ukraine where a four-way peace deal signed last week in Geneva to reduce tensions in the east has had limited impact so far. Pro-Russian separatists refuse to put down arms and pull out of occupied government buildings as Kiev and Moscow accuse each other of breaking the pact.

U.S. Vice President Joe Biden on Tuesday offered to back Ukraine's economy and urged Russia to make progress on its commitments under the deal, a day after Washington threatened to impose additional sanctions against Russia "in days".

Investors fear that further Western sanctions on Russia may disrupt oil supplies from the key producer.

"A lot of the Ukraine tension is priced in and will keep underpinning oil prices. We have been in a pretty broad (price) range and we are near the top of the range so unless things change significantly, we will drift lower," said London-based CMC Markets analyst Michael Hewson.

GOOD SUPPLY OUTLOOK

U.S. crude prices were weighed down by forecasts of a stock build at the benchmark pricing point at Cushing, Oklahoma.

A Reuters poll taken ahead of weekly inventory reports from industry group the American Petroleum Institute on Tuesday and the U.S. government's Energy Information Administration on Wednesday estimated crude stocks rose 2.7 million barrels on average for the week ended April 18.

"The drawdown from Cushing has slowed due to some recent problems on the Marketlink pipeline leading to expectations of near-term builds," said Amrita Sen, chief oil analyst at Energy Aspects.

Oil investors are also watching the progress of talks between Iran and world powers to end Tehran's disputed nuclear programme. President Hassan Rouhani's government confirmed speculation on Monday it had reshuffled the leadership of Iran's atomic agency to sideline nuclear experts opposed to talks with the West on its atomic programme.

China's March crude oil imports from Iran rose more than a third from a year earlier, keeping imports in the first three months of 2014 close to the levels seen before Western sanctions were applied more than two years ago.

(Additional reporting by Manash Goswami; Editing by Dale Hudson and David Evans)