If the oil market needed a theme song for now, it might turn to the one where Taylor Swift nervously sings: “Are we out of the woods yet?”

A slump in U.S. production, unexpected cuts in output from Nigeria to Colombia and rising gasoline demand have helped drive a major rally since mid-February. As investors boost their bullish bets, analysts from UBS Group AG to Morgan Stanley and Goldman Sachs Group Inc. see pitfalls ahead.

The global crude glut has spread to diesel and will threaten gasoline after the peak summer driving season. Unplanned outages may be resolved in coming months, boosting supplies as Iran seeks to regain market share and Saudi Arabia defends its turf. Demand is “underwhelming” in emerging markets, says Morgan Stanley. Goldman Sachs warns U.S. output may rebound if prices rally too quickly.

“Oil fundamentals are improving but the market is still apprehensive,” said Ehsan Ul-Haq, a senior consultant at KBC Advanced Technologies in London. “Only when refiners start complaining about the lack of supply will we see a sustainable recovery.”

Fuel Glut

In China, increased gasoline production has been accompanied by a surge in diesel output that’s exceeding consumption and leading to all-time-high exports. Now as the economy of the world’s second-biggest oil user faces the slowest expansion since 1990, there’s concern the gasoline market may also be heading for oversupply.

After exporting a record amount of gasoline last year, China has boosted shipments in February and March, customs data compiled by Bloomberg show. Stockpiles of light distillates including gasoline in Singapore, Asia’s oil-trading hub, are at near record levels, while inventories of the fuel in the U.S. are more than 25 MMbbl higher than the five-year average for this time of the year.

“If gasoline starts to fizzle out, it makes the recovery in crude a bit precarious,” said Nevyn Nah, a Singapore-based analyst at industry consultant Energy Aspects. “Gasoline has been the star of the barrel, and now with high inventories and slowing demand growth, it could lose some of its shine.”

Oil futures are on track to outperform analyst predictions for the first time in a year, data compiled by Bloomberg show. Brent crude, the benchmark for more than half the world’s oil, advanced above $38/bbl earlier last month, climbing past the median forecast for the second quarter and reached $48.14 on April 28, the highest in almost six months.

Oil on Friday was headed for its first weekly drop in more than a month as rising U.S. stockpiles and OPEC production cushioned the impact of declines in North American output. Brent was at $44.72/bbl, while West Texas Intermediate traded at $44.03.

Brent and WTI, the U.S. marker, have soared more than 60% since tumbling to a 12-year low earlier this year. Speculators’ net-long position in WTI jumped to the highest since May of last year in the week ended April 26, according to data from the Commodity Futures Trading Commission. Short positions dropped to a 10-month low.

“Although futures markets are being supported by speculative interest, physical markets are not showing tightness yet,” KBC’s Ul-Haq said. “Tightness in the physical market will be the harbinger of a strengthening market.”

Output Rebound

Unplanned disruptions and maintenance that have taken about 800,000 bpd offline this year have helped drive the rally in crude since February. A number of these outages are set to be resolved in coming months, Morgan Stanley analysts including Adam Longson said in a report dated April 25. What’s more, the gain in prices may encourage more production.

Drilled but uncompleted wells in the U.S. could return 500,000 bopd back to the market, according to Richard Westerdale, a director at the U.S. State Department’s Bureau of Energy Resources.

“When oil prices rebound, there’s a chance that those who stopped drilling may resume production as there are drilled but uncompleted wells,” said Hong Sung Ki, a senior analyst at Samsung Futures Inc. in Seoul. “But the resilience to do so must have fallen compared to last year because a number of producers went bankrupt since the plunge in oil.”

Oversupply Persists

It’s premature to embrace “green shoots” in the market because the current rally in prices is being driven by temporary factors, such as supply disruptions, while longer-term problems of surplus capacity persist, Goldman Sachs analysts including Jeffrey Currie said in a research note dated April 22. Oil fundamentals are poor and set to deteriorate, especially if prices move higher, the Morgan Stanley analysts said in its April 25 report.

Output from the Organization of Petroleum Exporting Countries may jump 1 MMbopd by June from 32.5 MMbopd in March as Saudi Arabia and Iran boost supplies, according to Morgan Stanley. “More aggressive efforts” from the group’s members could push daily production to 34 MMbopd, offsetting estimated global crude demand growth and declines in U.S. output for 2016, it said.

“We’re seriously concerned that the market may suddenly realize we have too much oil,” said Dominic Schnider, the head of commodities and Asia-Pacific foreign exchange at UBS’s wealth-management unit in Hong Kong. “Oil is ripe for a consolidation or correction into the mid-to-low $30s.”