CON-FIDENCE

Macroeconomic data was center stage for oil market participants as data spread disappointment that economic activity would be sufficient to spur energy demand significantly. The US producer price index missed market expectations and contracted -0.5% for July.

Meanwhile, both the Empire State manufacturing index and Philly Fed Index fell sharply. The Empire State manufacturing index plunged to 5.08 in July from 19.57 a month ago. The market had anticipated a milder drop to 18.25. For Philly Fed, the index slid -2.9 points to 5.1 in July while consensus forecast a rise to 10.

Jobless claims fell surprisingly to 429K for the week ended July 3. However, continuing claims rose +247K during the week following a -203K decline in the prior week. Worldwide crude oil consumption will increase by 1.05MM bpd, or 1.2%, next year to average 86.41MM bpd according to OPEC's  first assessment for 2011. IEA forecast that oil usage will advance 1.3MM bpd, or 1.6%, to 87.8MM bpd in 2011.

Wishful thinking, voted the market, given the price action relative to current fundamentals. Credit and equities markets appear to concur. A rising euro and falling gold and dollar express a misplaced confidence and their trends should resume as should oil fall next week.

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