WASHINGTON (Reuters) - U.S. crude oil demand fell to its lowest in nearly four years in July as the middling U.S. economy and fuel efficiency gains weighed on consumption, the American Petroleum Institute said on Friday.
At the height of summer driving season, petroleum demand dropped 2.7 percent from a year earlier to 18.062 million barrels per day. It was the smallest amount of U.S. oil consumption for any month since September 2008.
"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 percent in July to 8.624 million bpd. Consumption of the fuel was down 1.1 percent 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 U.S. gasoline demand down, said Tim Evans, an energy analyst for Citi Futures Perspective.
"This is an established, ongoing long-term trend," Evans said. "U.S. 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 U.S. 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 percent 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 said.
High unemployment, changing driving habits and rising fuel prices are all digging into gasoline consumption, which comprises about half of U.S. oil demand, Smith said.
Demand for distillate fuel, which includes diesel and heating oil, rose 4.9 percent to 3.622 million bpd in July, the API said.
Evans said much of the distillate demand appears to be export driven, as developing nations require more and more diesel and residual fuel.
Jet fuel consumption declined 0.8 percent to 1.455 million bpd for the month, it said.
Total imports in July accounted for 57.7 percent of U.S. oil demand, down from 62.2 percent a year earlier, the API figures showed.
Reporting by Ayesha Rascoe; Editing by Dale Hudson and M.D. Golan