Oil prices fell marginally early on Wednesday as geopolitical tensions in Eastern Europe lessened, but analysts say the drop would be “short-lived” and that an optimistic view will persist.

At 7.46 a.m. UAE time, Brent, the worldwide benchmark for two-thirds of the world’s oil, was down 0.23 percent to $93.07 per barrel. By 9.58 a.m., it had rebounded to $93.43 per barrel. The US crude benchmark, West Texas Intermediate, was trading 0.08 percent lower at $92 per barrel at 7.46 a.m., before rising to $92.23 per barrel by 9.58 a.m.

“Oil markets are losing momentum in a classic knee-jerk reaction to reports of a Russian de-escalation on the Ukrainian border,” said Claudio Galimberti, senior vice president of Rystad Energy.

“While Russia’s assertion of partially withdrawing troops from the Ukrainian border has eased the stranglehold tensions have on the market, the threat to supply remains, especially given Russia’s continued large-scale military operations in the region.”

Crude oil prices of $100 could lead to a significant increase in US tight oil output.

According to the IEA, a supply shortage in the Opec+ group might drive up oil prices.

German Chancellor Olaf Scholz met with Russian President Vladimir Putin in Moscow on Tuesday, as western allies were cautious in their response to Russia’s announcement that it was beginning to withdraw soldiers.

A Russian invasion on Ukraine is still “distinctly feasible,” according to US Vice President Joe Biden.

Due to tighter supply, rising demand, and production limits, oil prices have risen to their highest level since 2014. This year, several analysts predict that oil prices will approach and maybe surpass $100 per barrel.

“The situation in Ukraine is still tense, and oil prices may swing $10 either way. The oil market is extremely tight, and regardless of the situation in Ukraine, crude prices are still on track to reach $100 per barrel “Oanda’s senior market analyst, Edward Moya, stated.

According to Oslo-based Rystad Energy, current supply and demand fundamentals are “totally compatible” with Brent pricing at $100 per barrel, and any supply disruption or demand surprise may push the benchmark above that historic milestone.

Brent will “overshoot” to $125 a barrel this year and $150 in 2023, according to JP Morgan, the US’s largest lender. This is due to underinvestment in the oil and gas sector. Oil is expected to reach $100 a barrel by the third quarter of this year, according to Goldman Sachs.

Oil demand is expected to climb by 3.2 million bpd this year to 100.6 million bpd as global economies recover from the pandemic, according to the International Energy Agency.

Over the last 18 months, OECD commercial crude and liquid inventories have fallen to their lowest levels since November 2014.

Brent backwardation, in which prices for immediate delivery are higher than those for future supply, is also at its highest level in a decade, indicating that oil supply could be tightened more shortly.

“The supply side of the equation remains highly unpredictable, with Opec+ unable or unwilling to cover the current demand deficit, and certain Russian oil deliveries potentially jeopardized if a conflict with Ukraine occurs. The speed of development in US light tight oil production is insufficient to compensate for Opec and Russian deficits “Mr. Galimberti expressed his thoughts.

The IEA warned last week that the 23-member bloc’s “prolonged underperformance” had effectively pulled 300 million barrels off the market, or 800,000 barrels per day, since the start of 2021.

Beginning in March, Opec+ expects to add 400,000 barrels of oil per day to the market.

“Regardless of Russian de-escalation, the underlying signals for the global oil market remain overwhelmingly bullish,” Mr Galimberti said.