(Bloomberg) -- Oil markets are getting at least a small taste of a much-anticipated summer rally.

Prices have surged, after one of the most-aggressive periods of short-selling on record pushed futures to their lowest levels in months. Since early June, both Brent crude and West Texas Intermediate are up by almost 10%.

Much of the recovery is due to repositioning by key market players, as well as trading linked to a North Sea benchmark that helps set the price for more than half of the world’s oil. Bad weather in the Gulf of Mexico is also playing a part, particularly for American grades.

“It’s a bit of a mix between fundamentals improving, some short covering on spreads and the storms in Texas,” said Kitt Haines, a global crude analyst at consultant Energy Aspects Ltd., explaining the broad boost in prices. He cautioned that strength in some gauges may be limited in the short-term. 

The summer rally is critical for OPEC+ if it is to go ahead with a potential plan for some members to add barrels back to the global market — something they will only do if market conditions permit. Some traders say that the nature of the rally — specifically because it was inspired by short-sellers exiting — means that it may pause from here.

In the North Sea, which currently has ample supply, trading is also driving the surge. Trafigura Group and Gunvor Group have been bidding for every grade that sets the Dated Brent benchmark for physical barrels of oil. One key North Sea grade is now trading at a premium to the measure for the first time in more than a month. 

READ: Gunvor Snaps Up Benchmark Crude Oil That Others Are Offloading

Derivatives trading is also playing a part. In the first week of June, speculative traders added 57 million barrels of bearish bets against Brent crude futures — the most on record. A week later they reversed that position by 35 million barrels, the biggest unwind since 2020.

One of the key Brent derivatives, so-called contracts for difference, is showing strength. Near-term prices for CFDs are now higher than those further in the future for the first time in a month, a market condition known as backwardation.

In the Gulf of Mexico, the value of US sour barrels has climbed to the highest level in a month as refineries stocked up on supplies ahead of Tropical Storm Alberto. 

For the time being, it’s not profitable to send US crudes to Europe, RBC Capital Markets analysts including Brian Leisen and Helima Croft wrote in a note this week. That boosts the attractiveness of barrels produced in the North Sea, coupled with delays to some regional programs.

The North Sea and US aren’t the only oil markets flashing signs of strength. The bullishness has spread to the Mediterranean, where CPC Blend crude has narrowed its discount to Dated Brent in recent days. West African oil differentials have also risen.

Goldman Sachs analysts said this week that their tracking of commercial stockpiles in the OECD — a group of industrialized nations — has shifted to a decline over the last two weeks, a further sign of a market that could be on the brink of turning.

“As summer inventory draws materialize, we expect Brent to rise modestly further,” Goldman Sachs analysts including Yulia Zhestkova Grigsby wrote this week. “This summer deficit is starting to show more vividly in our tracking of global stocks.”

--With assistance from Lucia Kassai.

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