* China unexpectedly cuts interest rates
* Bernanke testimony: few clues for more easing
* COMING UP: China CPI, trade data due at weekend
(Updates with late losses as stocks sink in paragraph 7)
NEW YORK, June 7 (Reuters) - Oil prices fell on Thursday as
comments from U.S. Federal Reserve Chairman Ben Bernanke dimmed
hopes for additional stimulus measures, reversing an early
bounce from news of a surprise interest rate cut by China.
Crude shot higher in early trade, looking to extend this
week's rebound from the lowest Brent crude prices since early
2011, on expectations the first rate cut by China since the
depths of the global financial crisis would boost demand in the
world's second largest oil consumer.
But the bounce barely lasted three hours. Prices slid after
Bernanke's testimony to Congress offered little encouragement to
investors who were hoping the Fed would launch a third round of
bond buys, or quantitative easing (QE). However he did say the
Fed was ready to shield the economy from if Europe's woes mount.
"With China cutting interest rates that was a form of QE3,
but Bernanke only threw out a tease and crude prices pulled
back," said Dan Flynn, analyst at Price Futures Group in
Chicago.
Past stimulus moves have sent investors into riskier asset
classes such as commodities, pushing up prices. Financial
markets have been closely watching for any signs of fresh policy
steps to bolster the struggling economy. Gold prices dropped 2
percent while equities pared gains.
Brent crude traded down 71 cents to settle at $99.93
a barrel, having hit a high of $102.45 during intraday trade.
U.S. crude futures fell 20 cents to settled at $84.82.
Losses deepened in post-settlement trading to about $1.50 as
U.S. stock markets shed their modest gains in the final hour of
trade, ending flat.
After a string of supply disruptions and worries about the
potential loss of Iranian oil due to Western sanctions pushed
Brent to 2012 highs over $128 a barrel in early March, concerns
about the global economy have sent crude prices tumbling.
News on Thursday that Fitch cut Spain's credit rating by
three notches further stoked worries about the euro zone -- and
its potential impact on fuel demand.
"On Spain, the agencies usually just confirm what is already
known, because they don't want to be seen creating a crisis, but
the big event was the China cut, (which was) short term bullish
for commodities," said Bill O'Grady, chief market strategist at
Confluence Investment Management in St. Louis.
Brent dipped below $100 a barrel last week for the first
time since October 2011, and both contracts have been below 30
on the 14-day relative strength index -- typically a technical
sign indicating a commodity has been oversold -- since mid-May.
U.S. jobs data, showing unemployment benefits fell last week
for the first time since April, also gave a lift to prices.
Traders also kept a close eye out for exceptions to U.S.
sanctions against Iran, aimed at curbing Tehran's nuclear
ambitions, which government officials said would be announced as
early as next week.
Washington can grant waivers for the latest wave of
sanctions, which go into effect on June 28, if countries make
significant reductions of the crude they buy from Iran --
two-thirds of which goes to China, Japan, India and South Korea.
(Reporting by Matthew Robinson and Robert Gibbons in New York,
Manash Goswami in Singapore and Ikuko Kurahone in London;
Editing by Marguerita Choy, David Gregorio and Bob Burgdorfer)