Highlights
The railroad labor agreement is still being negotiated as another union reportedly rejected the proposed agreement over the weekend. It is remarkable how something as important as the nation’s railroads is so hush-hush. A railroad strike will be very ugly for prices for a week or two, but in the long run, it will not make any difference on demand.
China’s Baiyun district in Guangzhou suffered a major covid outbreak, with three covid deaths over the weekend, the first in over six months, prompting China to lock down 3.7 million people on Sunday. Each day this week will be a new adventure for the markets depending on the covid news out of China.
After the morning trade was well underway, crude began to drop like a rock. A client called to say his futures broker told him OPEC+ was going to sharply increase crude oil production and all long positions should be liquidated immediately. We had been searching for a reason for the drop in crude oil before the call. At the time, we could find nothing else. Less than a week ago, OPEC said they were cutting oil production something like 46,000 barrels a day due to decreased demand from China and with Europe to cut off 2.5 million barrels of day of Russia imports on December 5th, it made absolutely no sense that OPEC + would be increasing oil production and most certainly not a half million barrels a day. Fortunately, the client stayed with his written puts as January crude oil futures settled 14 cents higher on the day and opened higher last evening.