U.S. July oil demand lowest in 13 years: Govt

By Tom Doggett

WASHINGTON (Reuters) - The U.S. government on Tuesday revised down U.S. oil demand in July to 4 percent below year-ago levels as the struggling economy sent petroleum consumption to the lowest level for the month in 13 years.

Oil demand in July was 133,000 barrels per day (bpd) less than the Energy Information Administration previously estimated at a revised 18.771 million bpd, the lowest since 1996. That's down 786,000 bpd from a year earlier when demand was 19.557 million bpd.

The EIA report appears to contradict other recent government data that suggest the U.S. economy is on the road to recovery.

While gasoline demand was up from a year ago, consumption of other major refined petroleum products was down sharply.

"I think what this shows you is that an improving economy does not necessarily translate into explosive energy demand," said Phil Flynn, an analyst at PFGBest Research in Chicago.

"We have to remember that for the last 13 years we have seen strong demand growth and now, even though the economy is getting better, energy demand has a way to go," he added.

Residual fuel use fell the most, nearly 51 percent. However, that severe drop reflects industrial users switching to cheaper natural gas for fuel more than it does bad economic conditions.

The 1.6 percent increase in gasoline demand in July could also be due to much cheaper pump prices from a year earlier and that more Americans likely drove to vacation spots near their homes this summer rather than flying. Jet fuel demand was down almost 3 percent in July.

Demand for distillates, which includes diesel fuel, dropped 6.1 percent in July, as fewer goods were transported in the weaker economy compared with a year ago.

"Distillate demand really shows how hard many businesses were hit," Flynn said. "Airlines, factories and trucking demand fell off the map."

(Reporting by Tom Doggett; Editing by Lisa Shumaker)