(AP) -- Oil prices dropped below US$124 a barrel Wednesday as concerns about demand deepened and after Federal Reserve Chairman Ben Bernanke indicated that more U.S. interest rate cuts are unlikely.
By midday in Europe, light, sweet crude for July delivery was down 52 cents at US$123.79 a barrel in electronic trade on the New York Mercantile Exchange. The contract fell US$3.45 to settle at US$124.31 a barrel in the previous day's session.
That was oil's lowest settlement price for a front-month contract on Nymex since May 15. Prices are now more than US$11 below the trading record of US$135.09 a barrel hit on May 22.
In London, July Brent crude dropped 97 cents to US$123.61 a barrel on the ICE Futures exchange.
Bernanke's comments Tuesday suggesting inflation was too much of a concern to contemplate more rate cuts sent the dollar higher and raised questions about oil's ability to reach new highs in the short term. Bernanke signaled the Fed is inclined to leave rates where they are for now, but some analysts said he might be taking a step toward an eventual rise in rates later this year or early next year.
''The stars for a significant correction in crude oil are lining up,'' U.S. analyst and trader Stephen Schork said in a research note.
Evidence continues to mount that high oil prices, which have risen to nearly twice what they were a year ago, have cut demand.
The latest MasterCard SpendingPulse survey found that demand for gasoline in the U.S. fell by 4.7 percent last week -- which included the long Memorial Day holiday weekend -- compared to the same week last year. Averaged over the last four weeks, demand was down 6 percent last week compared to last year.
That dovetails with recent data from the Energy Department and Federal Highway Administration, as well as several other surveys suggesting high prices are cutting Americans' appetite for fuel. The U.S. is by far the world's largest consumer of energy and oil products, and swings in demand there can have an outsized impact on global prices.
In another sign of the effects of high oil prices, General Motors Corp. said Tuesday it would close four truck and SUV plants in the U.S., Canada and Mexico as surging fuel prices hasten a shift to smaller vehicles.
''Investors are ... wondering if we've got to the point, with prices around US$130 a barrel, if that's too much for consumers to bear,'' said Rachel Ziemba, an analyst at RGEMonitor.com in New York.
Also weighing on prices was the strengthening dollar, which bounced higher on Bernanke's comments in his speech via satellite to an international monetary conference in Spain.
Since last year, a series of Fed cuts designed to shore up the economy has led to a protracted decline in the dollar's value against the euro. That helped feed the record run-up in oil prices as investors bought commodities such as oil as a hedge against inflation.
But when the dollar strengthens, the effect reverses, and oil fell Tuesday as the dollar gained against the euro and yen.
In currency trading Wednesday in Europe, the dollar weakened to 104.68 to the Japanese yen from 105.26 yen Tuesday, while the euro was also down to US$1.5462 from US$1.5470 late Tuesday in New York.
''With Bernanke implying that there won't be ... more interest rate cuts, that removes one contributing factor that's been driving oil prices,'' Ziemba said.
Oil prices also fell on forecasts that U.S. oil and fuel supplies rose last week. Analysts polled by energy research firm Platts expect the U.S. Energy Department to report that oil inventories rose by 2.7 million barrels last week. The department's Energy Information Administration will issue its weekly inventory report later Wednesday.
Many analysts have long questioned whether high oil prices could be sustained; many blame speculative investing fueled by the falling dollar for a near doubling of crude prices over the past year.
In other Nymex trading, heating oil futures fell 0.80 cent to US$3.6316 a gallon (3.8 liters) while gasoline prices dropped 0.91 cent to US$3.3434 a gallon. Natural gas futures fell 12.6 cents to US$12.095 per 1,000 cubic feet.
AP Business Writers John Wilen in New York and Thomas Hogue in Bangkok, Thailand, contributed to this story.