VIENNA (Reuters) - Iran has slightly reduced the scale of its nuclear fuel production work and has fulfilled demands for more effective monitoring of its Natanz uranium enrichment site, the UN atomic watchdog said on Friday. But Iran also raised the number of installed, though not all enriching, centrifuge machines by some 1,000 to 8,308, a confidential International Atomic Energy Agency report obtained by Reuters said. The report said Iran also allowed inspectors to revisit the Arak heavy-water reactor site this month after barring access for a year, but this was a one-off and Tehran had not resumed providing design information to the IAEA. This would allow the Islamic Republic to resume a major expansion of enrichment if it chose, barring technical problems, UN officials familiar with the report said. The report will form the basis for six-power talks on Sept 2 to look into harsher UN sanctions on the Islamic Republic. Irans gesture of cooperation with the IAEA could make it harder for the United States and three big European allies to persuade Russia and China, major trade partners of Tehran, to agree on steps to squeeze its lifeblood oil sector. The report said Iran was enriching uranium with about 400 fewer centrifuges than the almost 5,000 operating at the time of the last IAEA report. It did not say why, but a senior informed diplomat told Reuters earlier a number of machines had been taken down for maintenance or repairs. Irans reported stockpile of low-enriched uranium had increased to 1,508 kg, almost 200 more than in May, the report said. UN officials said the output rate had stagnated because of the fewer number of machines on stream. It said Iran told the IAEA the complex was 63pc complete and the reactor vessel would be installed in 2011. Western officials are concerned the Arak site could be put to use making weapons-grade plutonium grew after its roof was installed, foiling monitoring with satellite imagery. Iran says it will only produce isotopes for medicine and agriculture. (Editing by Andrew Roche)