Oil prices have lost nearly 7% this month, but investors should be aware that a spike from last week’s levels to more than $120 is possible this year.

“This is a tight market. Supply and demand are close,” says Matt Badiali, senior research analyst at Banyan Hill. Global oil demand is expected to average 99.1 million barrels a day this year, but global oil supply stood at 98.8 million barrels a day in June, according to the International Energy Agency.

“We have supply constraints, thanks to Venezuela becoming a failed state. We have potential supply disruption with the Iran sanctions, and we have demand increasing with global growth,” Badiali says. “Disappointment that [the Organization of the Petroleum Exporting Countries] didn’t just open the spigots” on production also supports a higher oil price.

OPEC, along with nonmember allies including Russia, reached an agreement last month to curtail some of its production cuts, essentially increasing output by one million barrels a day. In part, the move was meant to offset supply losses tied to economic woes in Venezuela, disruptions in Libya, and renewed U.S. sanctions on Iran.

But the decision by major oil producers to lift output didn’t cause a drop in prices—instead, they climbed shortly after the decision, with U.S. benchmark West Texas Intermediate crude futures US:CLU8 on June 29 settling at $74.15, their highest since November 2014.

The production increase “wasn’t enough to close the gap between demand and supply that has developed over the last year and a half,” says Leigh Goehring, managing partner at Goehring & Rozencwajg, a research house focused on natural resources. It has been roughly 18 months since OPEC and its allies implemented a pact to cut production.

Following the return of some Libyan production earlier this month, oil prices began to move sharply lower, pushing global Brent crude UK:LCOU8 on July 16 to a three-month low of $71.84. Adding further downward pressure, a U.S. official suggested that the U.S. would issue some waivers for U.S. sanctions on Iranian oil; U.S.-Chinese trade tensions mounted, raising concerns about a drop in oil demand; and there was talk of a possible release of oil from the U.S. Strategic Petroleum Reserve.

Recent tweets from President Donald Trump have also called for Saudi officials to pump more crude and lower prices. It’s “very new and very unusual for a sitting president to be able to…comment on OPEC or oil prices to a degree where we see his tweets have an actual impact on the price” of oil, says James Bambino, managing director of the Oilgram Price Report at S&P Global Platts.

But the most important factors influencing prices are supply and demand, he says. The market may see a fall of $10 because of the tweets, but part of that drop would be attributable to “indications that foreign policy will have a longstanding impact on supply-and-demand factors,” says Bambino.

The IEA forecasts that global oil demand will grow to 100.5 million barrels a day in 2019, from 99.1 million this year.

Goehring argues that Saudi Arabia, OPEC’s biggest producer, has little spare capacity to make up for inventory losses elsewhere. It’s capable of pumping about 10.6 million barrels a day, just above current output of 10.3 million barrels a day, he says.

Global oil inventories may decline early in the fourth quarter “to levels that have historically seen triple-digit oil prices,” says Goehring. He believes that Brent oil prices will reach $100 a barrel this year. That has been his forecast for 18 months.

“ ‘I don’t believe the bull market in oil is over. I’m using this downturn as a buying opportunity.’ ” — Matt Badiali, Banyan Hill

He’s not the only one expecting supplies to come up short of demand. “We are coming out of a difficult bear market in oil,” Badiali says, as energy-company bankruptcies picked up during the slump in crude prices, which fell below $30 in 2016. WTI crude settled at $69.46 on Thursday. “An industry—even one as flexible and resilient as the oil industry—doesn’t recover that quickly,” he says.

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And if the U.S. follows through on threats to bar any entity dealing with Iran after November from accessing the U.S. credit markets, Badiali said it is possible to see WTI prices over $120 a barrel this fall.

“I don’t believe the bull market in oil is over. I’m using this downturn as a buying opportunity,” he says.

A version of this report first appeared on Barrons.com