By midday in Europe, light, sweet crude for July delivery was down 52 cents at $123.79 a barrel in electronic trade on the New York Mercantile Exchange. The contract fell $3.45 to settle at $124.31 a barrel in the previous session.

That was oil's lowest settlement price for a front-month contract on Nymex since May 15. Prices are now more than $11 below the trading record of $135.09 a barrel hit on May 22.

"The stars for a significant correction in crude oil are lining up," U.S. analyst and trader Stephen Schork said in a research note.

In London, July Brent crude dropped 97 cents to $123.61 a barrel on the ICE Futures exchange.

Bernanke's comments about rising prices sent the dollar higher and diminished the chance that oil would exceed the record highs of last month 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.

Evidence continues to mount that oil prices, nearly twice what they were a year ago, have finally cut into demand.

The latest MasterCard SpendingPulse survey found that demand for gasoline in the U.S. fell by 4.7% 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% 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 dramatic shift to smaller vehicles.

"Investors are ... wondering if we've got to the point, with prices around $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 was essentially flat against the euro, but gained against the British pound.

"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.

In other Nymex trading, heating oil futures fell 0.80 cent to $3.6316 a gallon while gasoline prices dropped 0.91 cent to $3.3434 a gallon. Natural gas futures fell 12.6 cents to $12.095 per 1,000 cubic feet.

Enlarge By Marcio Jose Sanchez, AP Oil prices have dropped amid concerns across the country about the economy. Here, a motorist fuels up at a gas station in Half Moon Bay, Calif., on May 27.

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