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The markets appear to be a bit more bullish than the underlying fundamentals would support at the moment. As prices continue to creep upward, it seems that investors are overly focused on the reduction in refinery output, and ignoring the accompanying decrease in demand that is driving the reductions.

The one positive trend on the economic barometer centers around the third straight month that sales have increased on existing homes in the United States. This slice of information would point to an increase in consumer confidence which gives the buyer the peace of mind to make a large long-term purchase. The general expectation around the market is that fuel consumption is on the verge of a large increase, even if the numbers are not yet there to support the argument.

The general consensus puts September futures in the $67-68 dollar range. A strengthening of the US dollar could actually lower the target, but again there is no evidence that a large scale shift is happening any time soon, although it would make sense to see a strengthening dollar in advance of a large scale economic recovery. For now though investors continue to hedge against the dollar by holding onto assets such as oil and equities which they feel will be the first to rise during an economic recovery.

Market leaders are closely watching crude oil demand in the emerging markets of China, Brazil, and India because a large increase in diesel and other distillates is expected to help prop up demand and drive the price higher. It was the result of this type of demand that largely was responsible for driving the price to over $145/barrel in July of last year.

Overall the producers are seen to be cutting back refinery production over the coming months in an attempt to draw down the global supply of crude oil.

Oil has not been as impacted by lower corporate earnings as many analysts would expect. Although the Dow continues to show declines as large companies such as Aetna publish larger than expected losses, oil futures have remained relatively untouched. The lower corporate earnings are not reflecting a lower demand to the market.

The market appears to be sitting on hold, awaiting the remarks of the Federal Reserve Chairman to become public on Tuesday to determine which way the overall picture is heading. This in combination with the report by American Petroleum Institute will be the basis for understanding if the anticipated recovery is actually increasing demand or not.

According to a Dow Jones survey of 10 analysts, the Department of Energy will reveal that crude oil stockpiles fell again last week, while gasoline and distillate stockpiles built. Crude stockpiles have declined in each of the prior six weeks, but are still 16% higher than a year ago, while slowing economic activity has helped gasoline stockpiles rise to the upper half of their average range and left distillate stocks at their highest levels in 24 years.

According to the Dow Jones poll, crude stockpiles last week fell 1.2 million barrels last week, gasoline stocks rose 700,000 barrels and distillates climbed 1.4 million barrels.