After dropping to multi-year low in February, both the global oil benchmarks North American WTI and North Sea Brent have rallied more than 85%, as many of the fundamental factors have created a temporary deficit in the oil market.

However, supply glut is still prevalent in the market and scores of tankers filled with oil sit idle in Singapore, world’s second busiest port. Supply is also peaking up across Middle East, in countries like Saudi Arabia, Iran, Iraq and the factors that led to temporary deficit like wildfire in Canada, outages in Libya, Iraq, and Nigeria will prove to be temporary. Only production short-fall in Venezuela likely to be more persistent.

But that is not likely to prevent these two benchmarks from rising as speculators keep betting on weakness in Dollar and recovery in commodities segment. As more hedge fund shorts turn long, oil is likely to gain further unless it falls victim to fundamental.

In the near term, we expect both the benchmarks to extend gains and for Brent to rise 10-12% further, whereas price not likely to drop below $44/barrel. Brent is currently trading at $50.1/barrel.