The Spain international has scored six goals in his last five games for the Stamford Bridge side, and is looking confident again after a difficult period following his £50 million move from Liverpool in 2011.
However, despite the 28-year-old's fine recent displays, Benitez believes the club need competition in forward positions - and revealed that Torres may have to battle for his place in the starting XI.
"Fernando [Torres] is improving physically, he has more confidence and he is scoring goals," he told reporters. "He is getting closer to what he was at Liverpool, that is very clear.
"His confidence is improving every day. I speak to him after training and you can see that he has the confidence and belief that he will do well."
Benitez suggests that a tactical change is bringing out the best in the striker, as he is now staying further forward in an attempt to get into better positions to put chances away.
"We are keeping him high up the pitch, instead of coming deep to help the team. We want him around the box. We are playing to his strengths now.
"He was trying hard before, but now he is trying hard in the right positions and he is scoring goals."
|5/1||Chelsea are 5/1 joint-favourites with William Hill to win the Europa League
While the 52-year-old is pleased with his compatriot's form in front of goal, he thinks the club will recruit at least one more forward in January, with Ramadel Falcao a top target for the Blues as revealed by Goal.com in November.
He continued: "Fernando knows in a top side, if you want to compete for all the trophies, you need competition in the squad.
"It will be important for us to have different options and it will be better for Fernando too. He knows we need competition.
"It is not easy, but we will be positive about the situation and Fernando is ready to fight for his position if he has to. Sometimes you want to play every game, but then you are so tired you cannot play at the level you did."
And Benitez added that although it will not be easy to recruit the ideal candidate in the January window, he is confident of finding a player to alleviate the pressure from Torres' shoulders.
"I know for sure the club will try to do the best for the team, not just for the present but also for the future," he stated.
"Top class players are looking for a good club, not just for one year but for the rest of their careers. We need to have someone there and we will try to make sure we have someone around.
"The problem in January is which one? Which player is available, which one is good enough to be here in a top side?"