Energy Futures Drift Lower on Easing Supply Concerns and Sanctions Uncertainty

Energy futures are drifting lower this morning, shedding less than 1% in premarket trading. Diesel futures are trading about 2 cents lower than yesterday’s settlement with the prompt month gasoline contract lagging behind, dropping 1.25 cents to start the day. American and European crude oil benchmark contracts are both down around 65 cents per barrel.

The fresh round of U.S. sanctions that were announced this week came along with a 50-day window for negotiations, which made them seem less likely to happen at all (there are 8 TACO Tuesdays before the early September deadline). China’s and India’s standing as Russia’s largest energy customers also blunts the potential impact of further sanctions on the world’s third largest oil producer. Those easing supply concerns are being blamed for this morning’s bearish sentiment.

Yesterday’s post-settlement trading seemed to ignore the American Petroleum Institute’s initial estimated 19.1 million barrel build in American crude oil inventories that was published yesterday afternoon, which was later revised to a more reasonable 839,000 barrel build for the week ending 7/11. The Department of Energy’s official energy balance sheet is due out at its regular time this morning (10:30 EDT).

The disorganized thunderstorm system named Invest 93L is currently moving west across the Florida panhandle with the Alabama, Mississippi, and Louisiana coastline in its sights. The NOAA currently gives the system a 40% chance of being upgraded to a tropical depression over the next 48 hours. While the threat of heavy winds are of concern, almost the entire LA coastline is already under flood watch, which stretches as far north as Baton Rouge and envelops 9 refineries. See the storm’s current position related to energy infrastructure in the EIA map below.