Slump in weekly US oil demand data may be short-lived blip

U.S. crude’s front-month contract was down 25 cents at $39.06 a barrel by 12:03 p.m. EDT.

With oil prices in a tailspin and few signs of a sizeable decline in production, oil traders are looking for any accelerating demand that might soak up the global supply glut.

Crude oil dropped sharply along with other commodities, but has steadied over the past two sessions.

The EIA report reiterated that American refineries are better equipped to process heavy sour crude and Mexican refineries are better equipped to handle light sweet crude.

Total import of crude oil reached $2.305 billion, down by 31.6 percent from $3.369 billion in the first half of 2014 as oil price per barrel fell to $60.277 this year from $111.281 a barrel last year.

Iran will ramp up crude oil production and reclaim its lost share of exports shortly after worldwide sanctions on the OPEC member are lifted, Iran’s oil minister Bijan Zanganeh said on Tuesday, while Nigeria is also boosting exports. The U.S. average is 10.64 cents.

West Coast stocks saw the biggest decline by region, shedding 2.3 million barrels to 51.125 million barrels.

However, USGC crude oil stocks still declined 1.74 million barrels to 222.8 million barrels because imports plunged 470,000 b/d.

Demand has been surprisingly strong, with monthly data showing a 2.5 percent rise in the first five months of the year as a deep slide in gasoline prices and a pickup in growth spurred use – making Wednesday’s data all the more shocking.

Lower crude oil prices in 2015 have crimped spending in the energy sector.

The effects of lower gasoline prices can already be seen in San Antonio where regular unleaded is being sold at $1.99 per gallon at the H-E-B and Murphy USA off Austin Highway.

Crude stocks at the Cushing, Oklahoma, delivery hub rose 256,000 barrels, a second consecutive weekly increase, EIA said.

Distillate stockpiles, which include diesel and heating oil, rose by 1.4 million barrels, versus expectations for a 1.0 million barrels increase, the EIA data showed.