COP28: a key moment for global climate policy and impact on energy markets

The COP28 summit, i.e. the 28th Conference of the Parties to the United Nations Framework Convention on Climate Change, is an event that draws the world's attention to climate issues. Scheduled to begin on November 30, 2023, it is a two-week meeting of global leaders, experts, activists and business representatives aimed at accelerating action on climate change.

Goal of organizing COP28

COP28 aims to bring member states together to assess progress on climate commitments and develop further strategies to reduce greenhouse gas emissions. In the light of growing climate awareness and pressure from the international community, the aim is also to intensify actions towards achieving the goals of the Paris Agreement and the UN 2030 Sustainable Development Agenda.

Potential findings and their significance

COP28 may bring new commitments to reduce emissions, finance climate action and support developing countries in adapting to climate change. It may also be important to raise the issue of increasing energy efficiency, developing renewable energy sources and moving away from fossil fuels, which has a direct impact on global CO2 emissions.

Potential impact on oil prices

Decisions taken at COP28 may have a significant impact on global energy markets, including crude oil prices. The drive to reduce greenhouse gas emissions may mean increasing investment in renewable energy sources and reducing dependence on fossil fuels. Such changes may lead to a reduction in demand for crude oil, which will potentially affect its prices on global markets.

However, there is also the possibility that Arab countries may argue that it is still possible to use oil to the same extent, but at the same time reduce greenhouse gas emissions. This aspect will be worth paying special attention to as it may be important from the point of view of the balance of demand and supply for oil.

Summation

COP28 is a key moment for global climate policy. The decisions made at the summit are likely to have long-term consequences for both the direction of climate action and global energy markets. This event is an important step in global efforts to combat climate change and achieve a more sustainable future.

Expected volatility in the oil market

From the point of view of the expected volatility on the WTI oil market, OVX index appears to show that the market is estimating a 43% year-over-year change in barrel prices. This, in turn, implies a potential change of approximately 12% per month or 21% per quarter. Therefore, if the volatility valuation is correct, a barrel of WTI may cost USD 85 or 66 in December. Volatility does not show direction, only the potential range of fluctuations.