The growing din of analysts warning of the schism between economic sentiment - which in May fuelled the biggest monthly commodity price rise in 35 years - and fundamental market realities has become a cacophony; finding one who believes that oil, metal and other prices can continue to gain without a correction is rare.

And, some say, every day that prices continue to defy depressed demand, swollen inventories and idled capacity move the market closer to an even deeper and steeper decline.

While there are few signs of that happening as yet, analysts say it may only be a matter of time before more supply begins seeping into a market that's still ill-prepared to absorb it, whether from Organisation of the Petroleum Exporting Countries (Opec) producers, Asia steel mills or copper miners.

"Outside of the core Middle East producers there is always the risk of Opec quota slippage. We have seen it many times in the past as prices stabilise - after the initial panic due to a decline in price, some producers start to relax," Jeff Brown, managing director for consultancy FACTS Global Energy, says.

For the moment, most producers are viewing the gains with a healthy dose of scepticism, but there are early indications that some are buying into the consumer hope and investor hype.

Most notable is the Chinese steel industry, which an official said on Tuesday had ramped up output to its highest since February, when news of Beijing's $585 billion (Dh2.15 billion) stimulus last encouraged a production surge - only to see prices crash when builders proved to be less keen than the steelmakers themselves.

And demand could come under pressure as higher costs filter into economies that are barely emerging from the worst recession in generations. China raised motor fuel prices by 6-7 per cent on Monday, its biggest increase since last June, while India has said it will move toward free-market pricing of domestic fuel.

Those elements threaten to further undermine a rally that most analysts view as precarious to begin with.

"If market sentiment turns negative again, the focus will shift back to current fundamentals, which remain weak, and prices will go down," Societe Generale analysts including oil research head Michael Wittner, said.

"The risk of a significant correction, back down to $50 or even lower, remains significant, particularly for the next 30-60 days."

The Reuters-Jefferies CRB broad commodity index surged by nearly 14 per cent in May, outpacing even last year's rally for the biggest gain since 1974. Oil led the way with a 30 per cent surge, rising like copper to a seven-month high.

Against that background, commodity producers could be forgiven for seizing the opportunity to grow market share.

For the moment, most suppliers appear to be resisting the temptation, but their resolve may gradually erode.

"We have some residual concern in the very short term that there may have been some over-buying in anticipation of the stimulus package," BHP Chief Executive Marius Kloppers said last week of the surge in iron ore imports by the world's top user.

Some markets have the capacity to respond faster than others.

Unlike two years ago, Opec producers now have 6.4 million barrels a day of spare capacity that they could begin to uncork; steel mills and smelters worldwide could fire up their furnaces within days, given the proper profit motives.

Even gold, where the vagaries of supply and demand typically take second seat to financial flows in terms of influence, has encountered fundamental obstacles to rallying beyond $1,000 an ounce, a price at which demand from top buyer India evaporates and mountains of scrap or recycled supplies floods the market.

Not that the market is completely bereft of fundamental justification for some gains: US crude oil stocks have turned a corner and begun declining; LME copper stocks have nearly halved from their peak; China has imported record volumes of soybeans.

Deutsche Bank's Adam Sieminski, who says the rise in oil prices seems to be "based more on hope than fact," notes that the replacement cost for new crude oil production is at least $60.

"It's not particularly logical to sell oil below replacement costs no matter how bad the current supply and demand balance and other 'fundamentals' might be."

Some say the rally highlights the disproportionate impact of investments flowing out of the massive forex and equity markets into smaller commodity markets, which are less liquid and therefore more susceptible to the price impact of new flows.

Net speculative length across US commodity futures rose last week to its highest since July, having doubled in a month, although open interest has barely risen from its lows, suggesting industry players are ceding space to bullish funds.

The US crude vs euro/dollar 30-day correlation is above 97 per cent at its highest point ever, according to Reuters data, as dealers resume a trade that was popular throughout 2007 and 2008.

The US crude vs US Dow Jones 30-day correlation has just eased from above 90 per cent, its highest since last October when both markets were diving in tandem.