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USA: Oil Deamand Falls as Economy Slows

US Crude Oil use fell 3.8% to 4 yr low in September or 719,000 BPD, from a year earlier to a 4 yr low of 18.173-M BPD in September, according to government data released Thursday.

The Y-Y fall was the largest since May and the 10th straight decline from Y 2011 monthly levels. Demand dropped 5.5%, or more than 1-M BPD, from August levels, with all major fuels recording declines, data from the Energy Information Administration show.

Demand for gasoline, the most widely used petroleum product in the world’s biggest Crude Oil consumer, fell by 1.9%, or 169,000 BPD, to average 8.575-M BPD. That was the weakest level in any month since January, and the lowest in September since Y 2008, when several hurricanes hit the Gulf Coast, curbing gasoline demand.

The sharp drop in Crude Oil demand showed in EIA’s latest numbers represents a 1.2% downward revision to earlier estimates based on preliminary weekly demand figures for the month.

Combined with previously published EIA monthly demand data, the September data suggests that US Crude Oil demand in the Q-3 of Y 2012 averaged 18.667-M BPD, down 1.9% from a year-earlier, and at the lowest Q-3 level in 16 ys. In the Y 2011 Q-3, demand fell 2.3% from the year-earlier period.

For the 1st 9 months of Y 2012, EIA data show demand averaged 18.578-M BPD, down 2% from a year earlier. Latest EIA weekly data show year-to-date demand through 23 November averaging 18.67-M BPD and lagging the year-earlier period by 2%.

The drop in gasoline demand came as the national retail price of regular fuel averaged $3.849 gal, a record for September and the highest average in any month since April. Retail gasoline was up 6.6% from a year earlier.

The September gasoline demand figure, combined with earlier EIA data, suggest Q-3 gasoline use slipped 0.6% from a year earlier to 8.843-M BPD, a 12-yr low for the period.

Demand in the peak April-September driving season was essentialy flat at the Y 2011 Q-3 level of 8.895-M BPD. That was down 3.4% from Q-3 of Y 2010 and the lowest for the period since Y 2001.

Demand for distillate fuel, diesel/heating oil in the month fell 6.5% from a year earlier, to 3.681-M BPD. That was the lowest demand for the month since Y 2009 and the weakest level in any month since July.

Within the distillate figure, demand for ultra-low sulfur diesel fuel, used in trucks and trains, averaged 3.448-M BPD, down 4.2% from a year earlier, and a 2 yr low for September.

Retail diesel fuel prices averaged $4.120 gal in the month, a record for September and the highest since March. Prices were up 7.4% from a year earlier.

Jet fuel use in September fell 2.6% from a year earlier, to 1.379-M BPD, the lowest level since April and the weakest in September since Y 1993.

The phase-out use of heavy residual fuel continued, with demand dropped to its lowest-ever monthly level on EIA records beginning in Y 1938. Demand averaged just 302,000 BPD, down 38.5% from a year earlier.

Strong competition from cheaply priced Nat Gas and stricter environmental regulations are dramatically curbing the use of the fuel in power generation and industrial boilers.