by Jozef Rynik
WBP Online Correspondent in Ottawa

Oil and gold prices headed lower early morning on Wednesday as demand for oil was expected to be lower and a stronger dollar had negative impact on demand for precious metal as safe-haven investment.

Later on, the prices of commodities rebounded as US productivity climbed at a faster-than-expected 1.6% annual rate between April and June and the markets were heading toward the US crude oil inventories.

WTI futures for September delivery were up 0.49% to $94.13 a barrel as of 2:56pm GMT on the New York Mercantile Exchange on Wednesday.

Brent crude oil futures advanced by 0.68% to $112.78 a barrel as of 2:58am GMT on the London-based ICE Futures Europe exchange. Brent crossed the $110-a-barrel level for the first time since May on Tuesday.

Investors are seeking better news about the US economy that could push demand and prices of oil higher. The US Energy Department raised its 2012 crude-price projection as global fuel consumption is expected to be higher.

"Commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 3.7 million barrels from the previous week. At 369.9 million barrels, US crude oil inventories are above the upper limit of the average range for this time of year," the US Department of Energy announced in the regular Petroleum Status report, released on Wednesday. 

Boston Federal Reserve President Eric Rosengren said on Wednesday the Fed should launch another round of quantitative easing of whatever size and duration in order to boost the US economy.

On the other hand, Federal Reserve Bank of Dallas President Richard Fisher said that global central banks may not have the capacity to undertake additional measures. 

The second hurricane of the Atlantic season, Ernesto, is expected to enter the Bay of Campeche, location of Mexico's biggest oil fields later on Wednesday. Enbridge Energy Partners LP (EEP) on Tuesday reopen their crude Line 14 that was previously shut because of a leak.

The pipeline delivers Canadian crude to refineries in the US Midwest.

Gold trimmed early losses

Gold showed a mixed performance on Wednesday, but remains steady.

Spot gold rose by 0.12% to $1,614.23 an ounce as of 3:07pm GMT. 

Spot silver edged down by 0.14% to $28.17 an ounce at 3:08pm GMT. 

Analysts said that investors prefer US Treasuries and the US dollar as save investment instead of gold, but they believe that the yellow metal prices will remain stable.

German industrial production fell 0.9% in June from May, when the industrial output rose an upward revised 1.7%, the Ministry of Economy said. Economist had projected industrial production to shrink by 0.8%.

Traders also look for any signs that the European Central Bank will launch its bond-buying program. Moreover, the outlook on Greece’s rating was revised to negative from stable by S&P on Tuesday. 

To contact the author of this story e-mail jozef.rynik@wbponline.com

Photo: ISIFA