LONDON (AFP) - Oil prices fell sharply on Tuesday in reaction to a solid strengthening in the dollar following comments from US Federal Reserve chairman Ben Bernanke. New York's main oil futures contract, light sweet crude for July delivery, dropped 1.42 dollars to 126.34 dollars a barrel. Brent North Sea crude for July sank 1.21 dollars to 126.81 dollars. Oil fell sharply after Fed chairman Ben Bernanke said the US central bank was "attentive" to the sagging dollar because of its potential impact on inflation. "We are attentive to the implications of the changes in the value of the dollar for inflation and inflation expectations," Bernanke said. The Fed chief, speaking via satellite 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." In reaction to his comments, the euro fell under 1.55 dollars in late afternoon European deals, after earlier climbing above 1.56 dollars. The stronger US currency tends to discourage demand for dollar-priced goods like oil because they become more expensive for foreign buyers. 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. Markets are keenly awaiting the report, due on Wednesday, because the United States is the largest energy consuming nation in the world. Crude futures rose in volatile trade on Monday as traders reacted to a stronger-than-expected US manufacturing report and news of the first storm of the 2008 US hurricane season. 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 about eight 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 Tuesday that the Organisation of 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, blaming speculative traders and the falling dollar for record-breaking oil prices.