A Post Took Out The Premium. The Storm Has Numbers.

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COVERT FINANCIAL INTELLIGENCE. INTERCEPTED DAILY.

MISSION BRIEF

Thursday’s oil rally lasted until lunchtime. Brent opened near $101 and traded as high as $105.92, up about 5.7%, on reports that the White House had asked for options to strike Iran before the midterm elections.

Then the president posted. Around midday President Trump wrote on Truth Social that “we will not be attacking Iran at any time prior to the Midterm Elections to be held in the United States on November 3rd.” In the same post he said “We are having productive discussions with the Islamic Republic of Iran,” and that the blockade “will remain in full force and effect.” Brent fell to about $103 after the post, CBS News reported. The December contract settled at $104.11, up 3.9%.

This morning Brent is near $102.70, down about 1.5%, at about 08:30 ET. That is an intraday mark.

Now set the week end to end. Brent closed last Friday at $102.25. It traded down to $97.06 on Tuesday and up to $105.92 on Thursday. It now sits within a dollar of that close. A range of almost nine dollars, for a net change of about half a dollar.

The strike report and the pledge are two readings of the same unknown. Neither moved a barrel. One raised the chance that the war reaches Iran’s oil before November. The other, for now, takes that chance away. A pledge is a statement, not an agreement. It covers the weeks before the vote and says nothing about after it, which is where The Atlantic placed the broader options, including strikes on Iran’s energy industry.

What the pledge took back. Yesterday this letter called much of the morning’s jump the price of not knowing, and said that part could fall as fast as it rose. Measured from Thursday’s high, about a third of the rise was gone by the settlement and more than half of it by this morning. What stays in the price is the part with numbers attached: attacks on tankers, a blockade still in force, and a hurricane that has emptied a third of the manned platforms in the Gulf of Mexico.

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THE OPERATION

Three counts of the strait that do not agree, and a storm that can be measured

The president’s post carried a figure. Oil was flowing through the strait “in record numbers,” he wrote, “22 million barrels, last night alone, with not one barrel coming from, or going to, Iran.”

This letter cannot match that figure to any ship-tracking count it has found for the strait. In a note dated 6 October, as reported by Reuters on Thursday, Kpler put crude through Hormuz at at least 10.1 million barrels a day, about 74% of prewar. Kpler’s wider tally adds Red Sea ports and ship-to-ship transfers in the Gulf of Oman, both outside the strait. On that basis, Middle East crude exports ran at 19.5 to 22.5 million barrels a day on several days late in September, against a prewar average of 18 million. The president’s number sits closer to the wider measure than to the strait alone. The post does not say which it is.

Daily ship counts tell a third story. Kpler counted seven commodity vessels through the strait on Tuesday, the fewest since 23 July, and ten on Wednesday. Before the war, about 125 large commercial vessels a day made the passage, according to Reuters. These counts miss ships with their transponders switched off, so the real numbers may be higher. None of the three counts is complete, and they do not agree.

Tehran’s public line is unchanged. A Friday prayer leader in Tehran said the strait would stay closed until Iran’s conditions are met, Iran International reported. Foreign Minister Abbas Araghchi said Iran is reviewing a US response to its “seven-day plan” to reopen the strait and expects to reply “within the next few days.” The attacks continue. UKMTO reported on Thursday that a crude tanker in the strait was hit by an unknown projectile on Tuesday, with no casualties. This letter names no party responsible for any attack.

The storm is the one with numbers. At 7 a.m. Central the National Hurricane Center put Isaias’s winds at 110 mph, up from 80 mph a day earlier, with the storm moving north-northeast. That is Category 2, and CBS News reported the hurricane center expected Category 3 this morning. Landfall is expected tonight or early Saturday inside the warning area, which runs from Ocean Springs, Mississippi, to the Bay and Gulf county line in Florida. Offshore operators had shut in 1.28 million barrels a day, about 63% of US Gulf oil output, as of 11 a.m. Central on Thursday, according to the federal offshore regulator’s figures as reported. On Wednesday it was about 25%. Crews had left 121 of 371 manned platforms. The next count is due this afternoon.

Counted, and temporary. The storm’s 1.28 million barrels a day is a counted loss with an end: platforms are inspected and restarted once the storm passes, unless something is damaged. The strait is the opposite. Its losses are large, disputed and open-ended. Brent is lower this morning with most of US Gulf output shut in, so on the price the storm reads as a short outage. Inspection reports after landfall will show whether it is.

RULES OF ENGAGEMENT

Yields ease after a strong auction. Sentiment today, consumer prices on Wednesday

Bonds took the pledge well. The ten-year Treasury yield touched about 5.36% early on Thursday, just under Wednesday’s peak, then closed near 5.23%, down about 4 basis points on the day. The thirty-year closed near 5.61%.

The thirty-year auction helped. The Treasury sold $22 billion of bonds at a high yield of 5.618%. Bids covered the offering 2.54 times, against an average of 2.41 at the last six sales, and indirect bidders, often read as a gauge of foreign demand, took 72.3%, Reuters reported. At these yields, there were buyers. This morning the ten-year was near 5.25%, little changed. Intraday. Against last Friday’s 5.28% close, that is a few basis points lower on the week.

Yesterday’s reading of the Fed stands: officials expect more tightening and have not named a meeting. Market pricing on CME FedWatch figures, as reported, puts an October hike below 20% and at least one hike by December above 80%. Those are market prices, not this letter’s view.

Today’s data is the University of Michigan’s preliminary October consumer sentiment reading, due at 10 a.m. It is a private survey, and a first reading that is revised later in the month. Forecasts put it near 48, against 48.1 in September, as reported.

Stocks had a harder Thursday than bonds. The S&P 500 closed at 7,765.36, down 0.47%, its second daily loss. The Nasdaq Composite fell about 1.3%, and chipmakers led the decline; Nvidia closed down 2.9%. Most coverage tied the move to a Financial Times report that OpenAI had told investors its annualized revenue was approaching $50 billion at the end of September, about $20 billion below figures reported late last month. The reports tie the gap to how sales through cloud partners were counted when investors compared companies, not to lost sales. Overnight, Bloomberg reported that OpenAI expects $70 billion in annualized revenue by the end of the year. One figure is a current run rate, the other an expectation for December. Nasdaq-100 futures were up about 0.7% early this morning.

Elsewhere, gold was near $4,185, up about 1.2% at a one-week high. The dollar index was near 102.2, little changed. All intraday. Next week, the bond market is closed on Monday for Columbus Day, on SIFMA’s recommendation; stocks trade. The big banks start reporting third-quarter results on Tuesday, as reported. September consumer prices arrive on Wednesday 14 October at 8:30 a.m., with the Beige Book that afternoon. Producer prices and retail sales follow on Thursday, as reported. The Fed decides on 28 October.

The exposure this week was not oil’s level. It was oil’s range: almost nine dollars, for a net change of about half a dollar. The biggest jump came from a report, and the reversal from a post. Neither is a measurement, and either can be overtaken. The pledge runs to 3 November and is silent on what follows. Iran says the strait stays shut, the president says oil is flowing in record numbers, and the counts in between disagree. Watch Isaias’s landfall and the next shut-in count, Tehran’s reply on the seven-day plan, the UKMTO log and Wednesday’s consumer prices. No deal has been announced.

END OF TRANSMISSION.

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