Oil demand in the world's largest energy consuming nation, the United States, has fallen by as much as 800,000 barrels per day (bpd) for the interim period ending June 30th, compared with figures for the same period last year. Meanwhile the dollar is hovering at around a six-month high against a host of currencies, including the euro and the yen.
Crude oil steadied at $113.35 a barrel by 06:14 GMT on Wednesday, after falling to $113.01 on Tuesday to its lowest price since May 2nd. US figures were showing a sharp slowdown in domestic demand, triggered by higher fuel costs. Benchmark UK Brent crude rose 89 cents to $111.54, just as traders began to speculate that a slowing in US demand is likely to cap prices.
The combination of high prices and weakening economies across the globe has curbed demand for oil, as it is consumers who are forced to dig deep into their coffers to meet the spiraling cost of this valuable commodity.
Due to the fact that the U.S. consumes more than a fifth of the world's oil output, the driving habits of American motorists are being case studied for clues upon pending global oil demand. Sales this year have fallen by up to as much as 19% and unsurprisingly new cars and trucks are remaining on the sales forecourt in increasing numbers.
Increased demand from growing economies, such as China, spurred a six-year rally that sent prices up to their peak on July 11th this year at $147.27 a barrel. This was compounded earlier this year by additional support from investors buying oil as a hedge against the weak dollar and inflation. In total demand has risen on average by 1.3m bpd in non-industrial nations during the first six months of 2008.
According to the Energy Information Administration (EIA) the decline represents the sharpest fall since consumption tumbled amidst recession in 1982. The US consumer is beginning to shun travel to cut costs. The International Energy Agency (IEA) now expects a combination of high crude prices and a stalling economy to translate into a 3.1% decline in US oil demand in 2008, followed by a further 2% drop in 2009.
"There's a swing in mood from supply concerns to falling demand particularly in the United States, but attention is beginning to turn to Europe and Asian economies as well," said Mark Pervan, senior commodities analyst at ANZ Bank, in Melbourne.
The world's second largest oil consuming nation, China, reported on Monday a surprising 7% fall in crude oil imports for the month of July. The figure was a seven-month low for the Chinese, their biggest monthly drop since January 2005. Refiners can only look-on with some concern at the unsustainable formula of soaring crude costs coupled with lagging domestic fuel prices.
