Crude Oil prices the mines, not the barrels

Crude Oil prices climbed near $85.00 on Sunday, a 2.5% increase from the session. The West Texas Intermediate (WTI) opened at $84.00 and reached a high just below $86.00, maintaining most of that ground. The military action, involving American forces striking two Iranian rocket launchers on Larak Island and Tehran responding with missile and drone attacks on two Jordanian air bases, did not remove a barrel from the market.

The statement emphasized that the military content of Sunday's strikes had no impact on the market. The story focused on the fact that two mobile launchers on a small island did not alter the balance, and Central Command described the action as limited and precise, akin to a traffic stop rather than a campaign. The key point was that the launchers were carrying sea mines, the only cheap instrument capable of closing the Strait of Hormuz.

Iran had already cleared the last batch out of the international shipping lanes the week before. The barrel's price reflected the odds of a mine being laid again, a transit risk rather than a production loss. Shipping data indicated that visible commodity vessels crossing the strait fell to about five a day over the weekend, and a tanker was struck by a projectile on an inbound run on Saturday.

The flow numbers showed improving exports from the Gulf, with estimates at 15-16 million barrels a day, well above the March trough of 5-6 million and still below the prewar range. A 2.5% session that fell short of the late-August peak, within WTI's usual range since the month's start, indicated a risk premium being topped up rather than a supply loss being discounted.

The weekly Treasury sanctions against close to 60 entities, individuals, and vessels were expected to take longer to affect prices and were less visible than missile attacks. The ISM manufacturing PMI and services PMI were scheduled for release, with the energy sector's impact on inflation releases being a key focus. The employment report and Beige Book were scheduled for later in the week, but none of these events would change the supply picture.

The session high near $86.00 represented the first line, with the late-August peak near $86.50 as the next objective. Support was seen at $83.50, with the 50-day EMA near $82.00 and the 200-day EMA near $78.50 providing additional support levels. The bullish bias remained strong as long as the $83.50 area held, with potential targets at $86.00 and then $86.50.

Technical indicators, such as the Stochastic Relative Strength Index nearing the overbought band, supported the bullish outlook.