Oil prices have edged closer to $90 per barrel due to rising supply fears, but fundamentals do not show evidence of tighter oil supplies, according to Julius Baer analysis.

Geopolitical events, including the recent attack on the Iranian Embassy in Syria or by Ukraine on Russia’s oil infrastructure, keep general uncertainty and fear levels elevated, the bank said in a daily update.

Despite all these reasons to see a tightening oil market, there has not been evidence of it so far.

Brent Crude closed at $89.35 on Wednesday, according to LSEG data, but while demand is largely stagnant in the western world and China, oil production growth in the Americas should compensate consumption growth in Southeast Asia in 2024, the Swiss bank said. 

Norbert Rücker, Julius Baer’s head of economics and next generation research said the upbeat market mood should eventually reverse.

“We see more downside than upside for oil prices going forward and shift our view to Cautious, while trimming our forecasts upwards.”

Petro-nations led by Saudi Arabia maintaining supply curbs has proved successful in artificially propping up prices in the current mood-driven market environment.

Oil storage in North America, Europe, and Asia remains well balanced, as far as there is reliable data, the update continued and logistics challenges, including the Red Sea shipping constraints and Russia sanctions, are ‘well mastered’.

Ukraine’s attacks on refineries disrupt oil product supplies domestically, but could lift Russian crude oil exports, as the country needs revenue to fund its warfare, the report added.

(Writing by Imogen Lillywhite; editing by Daniel Luiz)