Oil slides below $70 as COP28 agrees to phase out fossil fuels

• WTI Oil sees no halt to the ongoing correction and breaks below $70.
• Oil outlook is even more bearish for 2024 and longer term after the COP28 agreement.
• The US Dollar (Index) is steady around 104 ahead of the Fed rate decision. 

Oil prices are relentlessly printing new lows, flirting with the lows of July. Bears gained a boost on Tuesday after US Consumer Price Index numbers revealed yet again very sticky inflation. This will urge the US to keep pumping at full capacity to keep energy prices low. If the nearterm was not looking grim enough for Oil, COP28 has been able to overrule Saudi Arabia’s earlier objection, after over 200 countries agreed to fully phase out dependence on Oil. 

Meanwhile, the US Dollar (USD) is trading sideways around the 104 level in the US Dollar Index (DXY). Traders will brace for an eventful Wednesday ahead with the Producer Price Index numbers and the last Fed meeting of this year. Traders will be on the lookout for the projections of Fed members (DOT PLOT) and the message from US Federal Reserve Chairman Jerome Powell delivered during the press conference. 

Crude Oil (WTI) trades at $68.68 per barrel and Brent Oil trades at $73.25 per barrel at the time of writing. 

Oil news and market movers: US floods markets

• Just ahead of the end of COP28, participants have been able to issue an agreement that commits to fully phase out of fossil fuels. 
• At the same time critics have pointed out that the COP agreement contains  a lot of loopholes and unclear elements on how or when the phasing out needs to be reached.
• Traders will be on the lookout for any headlines around an OPEC report due to be released this Wednesday.
• The American Petroleum Institute (API) released its weekly stockpile change on Tuesday. A drawdown of 2.349 million barrels was registered compared to the build of 594,000 barrels in the previous week. 
• Near 14:30 GMT the Energy Information Administration (EIA) will release its findings on the stockpile changes. Previous was a drawdown of 4.632 million, with a light drawdown of 650,000 expected.  

Oil Technical Analysis: End of the line?

Oil prices and traders are playing with all the variations of the word grim - grimmer - grimmest, when it comes to outlooks and views for 2024 and longer term. With the COP28 commitment now in place to phase out fossil fuels completely, the demand picture looks only to be getting bleaker in the years to come. Expect of course to see repricings along the way with geopolitical tensions still present as the biggest counterweight against bearish pressures, though for now a further correction looks inevitable. 

On the upside, $80.00 is the resistance to watch out for. Should crude be able to jump above that again, look for $84.00 (purple line) as the next level to see some selling pressure or profit taking. Should Oil prices be able to consolidate above there, the topside for this fall near $93.00 could come back into play.

With Oil now breaching $70.00, $67.00 comes into play now, which aligns with a triple bottom from June, as the next support level to trade at. Should that triple bottom break, a new low for 2023 could be close with $64.35 – the low of May and March – as last line of defence. Although still quite far off, $57.45 is worth a mention as the next level to keep an eye on in the downturn. 

US WTI Crude Oil: Daily Chart