API said the development followed a middling US economy and fuel efficiency gains weighing on consumption
At the height of summer driving season, petroleum demand dropped 2.7% from a year earlier to 18.062 million barrels per day. It was the smallest amount of US oil consumption for any month since September 2008, Reuters reported.
“While retail sales for July are up and housing has improved, the weak petroleum demand numbers are a strong indication the economy is still faltering,” said John Felmy, chief economist for the API, the industry’s main lobbying group.
“Unfortunately, achieving robust growth will likely continue to be an uphill climb given the nation’s fiscal challenges, business uncertainty, and a European economy in jeopardy of sliding back into recession.”
A large chunk of the decline in oil demand came from gasoline use. Gasoline demand fell 3.8% in July to 8.624 million bpd. Consumption of the fuel was down 1.1% for the first seven months of the year, compared to the same period a year before.
Consumers are buying more fuel efficient vehicles, which is keeping US gasoline demand down, said Tim Evans, an energy analyst for Citi Futures Perspective.
“This is an established, ongoing long-term trend,” Evans told Reuters. “US gasoline demand appears to have to peaked in 2007 and over time we’ve been consuming less.”
The API’s demand figure for July is lower than the US Energy Information Administration’s preliminary estimate of fuel consumption at 18.876 million bpd for the month. The government agency saw July demand up 1.7% year-on-year.
The EIA issues its revised July demand number at the end of September.
Despite some recent upticks in economic data, oil demand will likely remain weak year-over-year, said Matt Smith, an analyst at Summit Energy in Kentucky.
“Suddenly people are thinking everything is improving again, when the reality is at least for oil demand that isn’t the case,” Smith the news wire.
High unemployment, changing driving habits and rising fuel prices are all digging into gasoline consumption, which comprises about half of US oil demand, Smith said.