COP28 Deal Weighs on Crude – Fed Next

Record Breaking DealCrude oil prices remain under pressure through the middle of the week amidst news of the COP 28 climate deal. The almost 200 nations represented at the  COP28 summit agreed on a record deal to transition away from fossil fuels in a bid to help tackle the increasingly worrying effects of climate change. The deal which comes on the back of two weeks of negotiations in Dubai marks the first of its kind given the clarity of the agreement and the commitment to reducing fossil fuel usage.OPEC OppositionDespite strong opposition from members such as Saudi Arabia and other OPEC producers, a compromise was eventually struck after negotiations ran over for an extra day. For oil prices, the news is clearly negative. Against the current backdrop of oversupply concerns and demand worries linked to the slowing Chinese economy, news of such a commitment is further worsening the outlook for oil prices near-term.FOMC AheadLooking ahead today, oil prices might well come under further pressure if the FOMC meeting results in USD trading higher. Given the slowing of the deflationary trend and the uptick in recent US labour data, the Fed might well push back more ardently against early-2024 rate-cut calls, pushing USD higher near-term.Technical ViewsCrude OilFollowing months of decline, crude futures are now once again testing the YTD lows along the 66.79 level. This level has underpinned the market all year and if bulls can defend the area again we might see some rotation higher near-term. However, if we break below, focus will shift to a test of 62.43 next.