5 Min Read
* Brent crude slips below $103 as gasoline inventories surge
* Gold falls as Bernanke cautions about low US rates
* Copper hits 6-week high after no word on Grasberg restart
By Barani Krishnan
NEW YORK, May 22 (Reuters) - Oil prices slumped on Wednesday after data showing an unexpected jump in U.S. gasoline stockpiles in the world's top oil consumer and gold slipped too after the Federal Reserve chief warned of the risks of holding down U.S. rates for too long.
Price of base metals and grains rose, offsetting some of the broader losses on the commodities complex.
Copper hit a six-week high on a continued production outage at Indonesia's Grasberg copper mine after a tunnel collapse that killed 28 workers at the world's second-largest copper mine.
Corn and wheat rallied on a bargain-buying bounce after hitting multiweek lows in Tuesday's session.
The 19-commodity Thomson Reuters-Jefferies CRB index fell more than half a percent, slipping to a near one-week low. Eleven of the CRB's components were down, with crude and heating oil being among the biggest losers with 2 percent decline each. Corn led gains, rising 3 percent.
Oil prices fell after data showing an unexpected jump in U.S. gasoline stockpiles sparked worries that summer demand in the world's top oil consumer might be weaker than expected.
The U.S. government's Energy Information Administration said gasoline inventories rose by 3 million barrels last week, suggesting the U.S. domestic fuel market was well supplied for the peak driving season.
While stockpiles of crude oil fell 338,000 barrels, the drop was less than half of the 800,000-barrel decline expected by analysts.
Benchmark Brent crude out of Europe's North Sea closed down 1.3 percent at $102.60 a barrel. U.S. crude settled at $94.28, down 2 percent.
In U.S. gasoline, the front-month contract futures contract traded in New York fell almost 1 percent to $2.8194 a gallon. Gasoline has slid nearly 4 percent since May 17, when it touched $2.93, its highest in a month.
Gold turned sharply lower as investors weighed U.S. Federal Reserve Chairman Ben Bernanke's congressional testimony warning of risks to holding interest rates too low for too long and opened the possibility of reducing bond purchases.
In prepared remarks, as expected, the Fed chief said monetary stimulus was helping the U.S. economy recover, and it was too soon to remove existing measures.
Then, during the question and answer period, Bernanke raised the possibility of gradually reducing the Fed's bond purchases if the labor market improved in a sustainable way. . That sparked a sell-off in gold.
"The big debate with the Fed has been, are they or aren't they going to begin reducing their liquidity subsidies this year or is it going to continue to go on?" said Michael Cuggino and president and portfolio manager at Permanent Portfolio Funds in San Francisco.
The dollar also rallied after Bernanke's question-and-answer session, further pressuring gold into negative territory.
U.S. gold futures for June delivery finished at $1,367.4, off the previous close of $1,378.20. In after-hours trade, it fell 1.4 percent to $1,358. That was in stark contrast to the market's rally to above $1,413 earlier in the day when Bernanke made supportive remarks about the stimulus.
Copper rallied after Freeport McMoRan Copper and Gold Inc said it would not restart production at its Grasberg copper mine in Indonesia until it was sure of safety at the mine
where it suspended operations on Wednesday last week.
Investors are concerned the accident, one of the country's worst mining disasters, could further strain relations between Freeport and trade unions after a three-month strike in late 2011 and smaller disputes since.
Other supply disruptions, including a landslide at Rio Tinto's Bingham Canyon mine in Utah, the shutdown of India's two top copper smelters and some smelters in China cutting output - also cushioned copper prices.
Copper hit 18-month lows below $6,800 a tonne earlier this month. It has rebounded since on growing confidence that the U.S. recovery is on track although prices are still down some 6 percent this year.
In Wednesday's session, three-month copper on the London Metal Exchange ended up at $7,475 per tonne, after touching $7,533.75 a tonne, its highest level since April 12. It closed at $7,375 on Tuesday.