* Codelco offers 2014 China premiums at $138, highest since 2005
* Daily average primary aluminium output falls for fourth month
* Coming up: Fed releases Oct meeting minutes at 1900 GMT
By Maytaal Angel
LONDON, Nov 20 (Reuters) - Copper rose on Wednesday from the previous session's three-month lows, helped by Federal Reserve Chairman Ben Bernanke's pledge of support for ultra-easy monetary policy and by China's plans to make its currency more flexible and market-driven.
Investors were cautious, however, as they awaited the minutes from the Fed's October meeting, due later in the session, and noted a looming surplus expected to widen in the copper market next year.
"The noises we've been getting ... are that stimulus is to last for longer than the market had expected. That's definitely a positive," Natixis analyst Nic Brown said.
"Out of China, the idea of making market forces take a more decisive role in the economy is crucial. A strengthening yuan should push up the dollar price of metals to account for the fact that Chinese purchasing power is increasing," Brown said.
He added: "Everybody is expecting a surplus next year, but we think there's scope for a short-term squeeze."
Three-month copper on the London Metal Exchange closed at $6,996 a tonne from $6,970 at the close on Tuesday.
Copper sank to its lowest since Aug. 7 on Tuesday at $6,910, having last week broken below a $7,000-7,420 range in place for the past three months.
Bernanke said on Tuesday the Fed will maintain ultra-easy U.S. monetary policy for as long as needed, which could mean holding interest rates near zero until "well after" U.S. unemployment falls under 6.5 percent.
In another closely watched move, the Chinese central bank set the yuan' s mid-point for Wednesday trading at its highest since a landmark revaluation in 2005.
Though markets have grown cautiously optimistic about sweeping plans by China to engineer a more market-driven economy, metals investors remain concerned that supply will outstrip demand next year.
Analysts polled by Reuters expect the copper market to post a surplus of 182,000 tonnes this year, up from a previous forecast of 153,000 tonnes, before ballooning to 328,000 tonnes in 2014.
On the other hand supply is tight at the moment. Chile's Codelco, the world's top copper producer, has raised the premium for 2014 term shipments to China by 41 percent to a nine-year high, four trading sources said.
The latest LME data also showed copper inventories fell by 1,950 tonnes to 445,700 tonnes, the lowest level since late February. Shanghai and COMEX stocks have also been falling.
In other metals, aluminium closed at $1,781 a tonne from a last bid of $1,793 on Tuesday.
Daily average primary aluminium output excluding China fell for the fourth consecutive month in October to 65,300 tonnes from 66,600 tonnes in September, data from the International Aluminium Institute (IAI) showed on Wednesday.
The decline was mainly due to production cuts in east and central Europe, North and South America and the temporary shut down of one of two potlines at Maaden smelter in Saudi Arabia, according to IAI and CRU data compiled by Russian producer United Company Rusal.
Zinc closed at $1,891 a tonne from $1,895, lead at $2,098 from $2,092, tin closed flat at $22,800 and nickel at $13,530 from $13,630.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin