May 12 (Bloomberg) -- Crude oil declined after touching a record $126.40 a barrel in New York amid signs that rising prices may curb demand in emerging markets.

China's oil imports declined in April as crude costs prompted refiners to cut demand, and India's industrial production grew at the slowest pace since 2002, reports today showed. Rising energy demand in China and India has contributed to a doubling in oil's price the past year.

``If you have a continuation of that drop in Chinese imports, if that extends beyond a month, and if you have a slowdown in India, that obviously changes the dynamic'' for the oil market, said Kyle Cooper, director of research at IAF Advisors in Houston.

Crude oil for June delivery fell $1.73, or 1.4 percent, to settle at $124.23 a barrel on the New York Mercantile Exchange at 2:52 p.m., after rising to $126.40 a barrel earlier today, the highest since trading began in 1983. Prices climbed 8.3 percent last week on speculation that supply won't keep pace as demand peaks during the U.S. summer driving season.

Oil imports to China, the world's second-biggest consumer, dropped 3.9 percent from a year earlier to 14.24 million metric tons, about 3.5 million barrels a day, the Beijing-based Customs General Administration of China said on its Web site today. The decline was the first in 18 months.

In India, production at factories, utilities and mines rose 3 percent from a year earlier after gaining 8.6 percent in February, the statistics office said in New Delhi today. Economists surveyed forecast a 5.8 percent increase.

`Speculative Bubble'

``It's the tail-end of a speculative bubble,'' said Walter Zimmerman, vice president of United Energy Inc. in New Jersey. ``The question is, have prices gone high enough to cause an economic contraction that will give us more than a seasonal retreat?''

Brent crude oil for June settlement fell $2.49, or 2 percent, to $122.91 a barrel on London's ICE Futures Europe exchange. The contract touched a record $125.90 on May 9.

China ordered banks to set aside larger reserves for the fourth time this year after inflation accelerated to almost the fastest pace since 1996. That may cool growth in one of the world's fastest-growing economies and curb commodities demand.

To contact the reporter on this story: Robert Tuttle in New York at rtuttle@bloomberg.net;

Last Updated: May 12, 2008 16:15 EDT