In a new report, Macquarie Research analyst Vikas Dwivedi explains why the firm believes that crude oil’s recent rally will be short-lived. Although the firm remains positive on oil in the medium-to-long-term, Dwivedi believes it’s headed back to the $30/bbl range before its ultimate move higher.

According to Dwivedi, the more than 50 percent surge in oil prices in recent weeks has happened despite lingering fundamental weakness in the oil market. Instead, Dwivedi believes the rally has been fueled by institutional capital inflows and a series of short squeezes.

Although Dwivedi concedes that there have been a number of bullish fundamental catalysts for the rally, the market has likely gotten ahead of itself.

Even if a pullback does occur, Macquarie maintains a bullish outlook for oil prices in the longer-term. The firm is calling for a U.S. crude production decline of 700 KBPD and a total non-OPEC decline of 1.1 MM BPD in 2016, both above consensus estimates.

Dwivedi also warns…

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