Oil prices have had a very good run for several months now. Dating back to the recent low reached June 21, WTI is up an impressive 35% to a new two-year high. Crude hasn’t traded at $57 since June 2015.

During this latest increase, the oil futures curve has finally achieved backwardation (which isn’t necessarily permanent). The long-awaited normalization is as of now nearly complete. There is still some contango lingering in the front months, if only through the April 2018 contract (the Dec 2017 is now the front month).

The oil curve gives a few clues that all is not well despite the big price gains recently. Reminiscent of what was supposed to happen with the UST curve, but didn’t, the WTI curve in achieving backwardation should have risen in unison first, but it didn’t. The back end remained anchored in the low $50’s like the long end of the UST curve remained anchored in the 2% to 3% range.

It suggests the global oil market is actually balancing – nowhere near full recovery. There are several key aspects of the WTI futures market that are consistent with that view.

On the plus side, Money Managers have expanded their net long position. Typically, managers are the primary movers for the WTI price, and curve, in the US crude market. However, going back to the oil crash in late 2014, their hold on price movements has weakened, often noticeably.

Even at $57, that is quite a bit below what we might otherwise expect of oil prices given how long money managers have become again. Just as earlier this year when this segment of the futures market went record long, there are clearly offsetting positions that are keeping these oil advances contained.

The primary opposite was and is that of the oil producers. Their involvement in the futures market is often related to hedging their product, both what is going to be extracted out from the ground in the future as well as the oil that already has been but is sitting in storage, largely in Oklahoma.