If the oil bulls were looking for inspiration from the Federal Reserve to get their bullish juices flowing they were sorely disappointed. Once again, with a weakening economic outlook, some terrible housing numbers and a not so inspiring Energy Information Agency report, the oil bulls have got to be asking themselves where the demand growth is going to come from. Even the International Energy Agency is saying that growth in world fuel demand will decline over the next five years as the pace of Chinese consumption slows.

According to Bloomberg News, the International Energy Agency estimates that annual demand growth will shrink every year to average 1 percent in 2015, or 940,000 barrels a day, from 1.9 percent, or 1.62 million barrels a day, in 2010. Total consumption will be 91.93 million barrels a day in five years compared with 86.39 million barrels a day this year. Not the type of outlook that inspires peak oil talk.

After that report came news that purchases of new homes in the U.S. fell in May to a record low as the tax credit expired. If the housing market is that dependant on government support it makes you wonder how dependent the entire economy and the price of oil are going to be on government support.

As I have said before, the price of oil is in part a concoction of the Fed. The price of oil has been propped up by the Fed policy of low interest rates and quantitative easing. Recently the price has been supported by the European Union's bailout of Greece as these measures avoid deflation and a demand collapse. Still, while the stimulus has kept the market strong, to advance to higher levels and sustain them we need to see more economic activity not just numbers that are apathetic.

We need to see that the Fed is getting more optimistic not less. We do not just want to hear that economic recovery is proceeding and that the labor market is improving gradually. We want to move beyond that. Or that household spending is increasing but remains constrained by high unemployment. We want more than modest income growth.

Credit is still tight and people's wealth is failing because of weak housing. We do not want to see the Fed raise new concerns like commercial real estate that may still fall in the future and create new strains on the economy and urban blight even in the suburbs.

Oil bulls want to see more on the demand side and an end to building crude supply. The EIA reported that U.S. commercial crude oil inventories increased by 2.0 million barrels from the previous week. At 365.1 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Not really that bullish. Of course we did see gasoline inventories fall by 800,000 barrels and distillates increase by 300,000 barrels.

On the demand side the EIA said that over the last four weeks, motor gasoline demand has averaged 9.2 million barrels per day, up by 0.8 percent from the same period last year. Distillate fuel demand has averaged 3.9 million barrels per day over the last four weeks, up by 12.8 percent from the same period last year. Jet fuel demand is 0.8 percent lower over the last four weeks compared to the same. Still while that shows improvement I do not think it is enough to shake the bearish macro clouds that seem to be a gathering storm. Make sure getting the latest and greatest business news on the Fox Business Network where you can see me every day! Call for my daily trade recommendations while they are still free. Call me at 800-935-6487 or email me at pflynn@pfgbest.com to open your account!

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