Crude slumped as the dollar strengthened on Monday after Federal Reserve chief Ben Bernanke's comments suggesting the Fed is likely to stop cutting rates.
Bernanke said the U.S. central bank is attentive to the impact of the dollar on inflation. Analysts commented that if the Fed stops slashing rates, the dollar could recover and crude prices could ease.
Crude oil futures for July delivery fell $3.40 or 2.66 percent to $124.36 a barrel in New York at 3:38 p.m. Futures hit a record on May 22 of $135.09 a barrel. Today's the price is the lowest since May 15.
Brent crude futures for delivery in July fell $3.58 or 2.79 percent to $124.45 a barrel on the London ICE Futures Exchange. Brent futures reached as much as $135.14 a barrel on May 22.
A falling dollar has driven numerous investments into the commodities futures sector as investors seek to compensate for inflation. Energy and metals fell after Bernanke's comments.
Bernanke showed concern that the slide in the U.S. dollar has contributed to an unwelcome rise in inflation.
The dollar climbed 0.52 percent to $1.5456 per euro at 4:22 p.m. Earlier it traded at $1.5411, the strongest it has been versus the euro since May 14.
The market is awaiting a report on U.S. crude inventories due on Wednesday. Analysts forecast crude stockpiles rose 1.1 million barrels for the week ended May 30, according to a Reuters survey.
Analysts estimate gasoline stocks will increase an average from 600,000 to 825,000 barrels and distillate stocks will rise ranging from 1.4 to 1.68 million barrels the past week.