Oil trader sentiment hangs in the balance, and while fears of another collapse in price are contained, the odds of a further move to take it significantly higher than $50 a barrel appear slim.

A stream of positive data showing shrinking U.S. oil stockpiles and stronger than expected demand in the summer months have bolstered the market and stoked a rebound in prices since July.

Now, as oil market watchers focus on the spot price they are also monitoring contracts for delivery in months to come for signals about how supply and demand is playing out.

In recent days the Brent crude futures curve has begun to signal that traders believe a long-awaited rebalancing of the market is finally under way, with spot oil prices moving above those for delivery in future months.

This market structure, known as “backwardation,” is seen as a sign of tightening supplies and strong demand today. It should also encourage those who have held physical crude in storage during the oil glut to sell barrels into the market as it is no longer as profitable to keep hold of them.

Last week prices of Brent crude oil contracts for October delivery were almost 20 cents a barrel (bbl) higher compared with those in December and 9 cents higher versus those in April 2018.

Although the rest of the forward curve is in contango ? when prices for future delivery are higher than spot prices ? if backwardation were to hold, it would suggest inventories are expected to keep falling, likely leading to higher oil prices.

While some see the first stirring of a backwardation since oil prices were above $100/bbl, as evidence the market has finally turned a corner, others warn this is probably just another false alarm.

"It's hard to be aggressively negative if every week you're getting stronger numbers," said Paul Horsnell, global head of commodities research at Standard Chartered. "But there is still resistance. The market is not willing to push prices too far up."

The shifting oil curve coincided with US government data showing a sixth consecutive weekly decline in oil inventories as refineries processed more crude. Meanwhile, the world's main energy agencies have revised higher their assumptions for global crude demand.

Hedge fund managers too raised their net bullish positions in Brent crude futures and options by the equivalent of about 58 MMbbl in the week to August 8 ? the largest weekly increase net long holdings since December, Intercontinental Exchange data showed.

But within just a few days the structure has already weakened with the backwardation only present in the first two months on Aug. 15 ? showing just a 6 cents premium for October compared over November.

While many market participants believe demand is finally closer to matching supply, it is clear not everyone is buying into the optimism.

Money managers who rapidly built up long positions in the hopes of a quick rebalancing in January, after OPEC and other world producers enacted supply cuts, incurred huge losses. Even big-name investors, from Andy Hall to Pierre Andurand, were caught out.

Many analysts say the current tightness in the market is primarily indicative of several seasonal factors converging ? from high oil usage in the summer months in the Middle East for air-conditioning, to Americans filling their cars more for their holidays.

David Martin at JPMorgan notes that with the end of the U.S. driving season quickly approaching and more refineries shutting down for maintenance in the next few weeks means "crude buying may be close to its seasonal peak".

But supply remains strong. Saudi Arabia, OPEC's largest producer, for the first time pumped above its agreed allocation in July, despite the cartel's de facto leader stepping up pressure on countries to comply with the deal. All the while the cartel's total output is increasing, led by Libya.

Concerns about future production rising are curtailing a stronger move into backwardation, analysts say.

Output from beyond OPEC is on the up and higher oil prices could unleash more production from U.S. shale fields, with global stockpiles still 219 MMbbl above the level global producers are targeting with their cuts.

Michael Dei-Michei at JBC Energy in Vienna says the rise in active U.S. drilling rigs this year meant output would keep rising.

"There is no way this oil can be accommodated into the market so prices are going to have to give at some point," Dei-Michei said. "This bullish sentiment cannot last."

Widespread selling of oil stored on tankers at sea is one metric that analysts monitor to see if backwardation is really going to last. Energy data company Kpler says the amount of oil on tankers is down from a peak of about 100m barrels on average in June, but it is still at a fairly high 81m barrels during the past 30 days.

"Of course the market has gotten a little better, but what we're seeing is no game changer," Dei-Michei said.

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