NEW YORK (AFP) — Oil prices fell sharply on Tuesday as the dollar jumped higher on foreign exchange markets in the wake of comments from US Federal Reserve chairman Ben Bernanke.
Oil prices tumbled after the US central bank chief said Fed policymakers were "attentive" to the sagging dollar because of its potential impact on inflation.
Analysts said oil prices declined in the wake of Bernanke's comments as a stronger greenback would make it more expensive for some foreign buyers to purchase oil contracts, which are priced in dollars.
New York's main oil futures contract, light sweet crude for July delivery, closed down a heavy 3.45 dollars at 124.31 dollars a barrel.
In London, Brent North Sea crude for July delivery settled down 3.44 dollars at 124.58 dollars.
Oil prices fell after Bernanke said: "We are attentive to the implications of the changes in the value of the dollar for inflation and inflation expectations."
The Fed chief, speaking via satellite from Washington to a monetary conference in Barcelona, Spain, offered a mixed assessment of US economic conditions, while highlighting concerns about inflation and the dollar.
He added that "recent increases in oil prices pose additional downside risks to growth."
The euro had fallen to 1.5461 dollars at 1919 GMT during afternoon New York trading, compared with 1.5540 dollars a day earlier, following Bernanke's remarks.
Earlier on Tuesday, oil prices had paused "ahead of important US economic data this week and the weekly US fuel inventories report, which could help to establish direction for the market," said Sucden analyst Andrey Kryuchenkov.
The Department of Energy's weekly report on US energy inventories often moves prices following its release.
Barclays Capital analyst Kevin Norrish said "prices mainly drew support (on Monday) from the start of the Atlantic hurricane season," which began Sunday and lasts until the end of November.
"Arthur, the first storm of the hurricane season, served as a timely reminder of the potential supply disruptions that can result due to these storms as two of Mexico's crude oil ports remained closed for the second consecutive day."
The most hurricane-prone US region is the southeastern coastline, running from the states of North Carolina to Texas, where many US energy facilities are based.
Oil prices have now lost around 11 dollars since striking record peaks of 135.14 dollars in London and 135.09 dollars in New York on May 22.
Meanwhile, Kuwait's Oil Minister Mohammad al-Olaim said that the Organisation of the Petroleum Exporting Countries was prepared to pump more crude if necessary.
"OPEC is prepared to increase supplies only if the market needs it," Olaim said in statements reported by the official KUNA news agency.
Kuwait is OPEC's fourth largest oil producer, pumping around 2.5 million barrels per day.
OPEC produces 40 percent of the world's oil. Its current output stands at about 32 million barrels per day.
The cartel has repeatedly brushed aside international demands to increase output in the past six months, blaming speculative traders and the falling dollar for record-breaking oil prices.
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