BANGKOK - OIL prices dropped below US$124 a barrel yesterday in Asia, as demand concerns deepened and after United States Federal Reserve chairman Ben Bernanke indicated that more US interest rate cuts were unlikely.

Mr Bernanke’s comments suggesting inflation was too much of a concern to contemplate more rate hikes sent the US dollar higher and raised questions about oil’s ability to reach new highs in the short term.

He signalled that the Fed was inclined to leave rates where they were for now, but some analysts said he might be taking a step towards an eventual rise in rates later this year or early next year.

By mid-afternoon in Singapore, light, sweet crude for delivery next month was down 66 US cents at US$123.65 a barrel in electronic trade on the New York Mercantile Exchange (Nymex). The contract had fallen US$3.45 to US$124.31 in the previous session.

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

Evidence continued to mount that oil prices nearly twice what they were a year ago had cut demand.

Averaged over the last four weeks, demand was down 6 per cent last week compared to last year.

ASSOCIATED PRESS

Source : Straits Times - Thursday 5 June 2008