LONDON (Reuters) - Brent crude futures finally bear the hallmarks of a market in which supply and demand are falling into balance, although the last time this happened, it was 2014 and the price was over $100 a barrel.
Prices of oil for prompt delivery are above those for delivery further in the future to the extent that the first three timespreads, or price differences between two futures contracts, are in negative territory.
The first three spreads last showed this structure, known as backwardation, in mid-2014, just before a tidal wave of surplus oil washed the crude price below the $100 milestone.
At around $53, the price is about half that level now, but this inversion shows investors and traders may just be buying the notion that supply is finally catching up with demand, as global inventories decline and consumption picks up.
"The objective of OPEC was to draw down crude oil stocks and bring the structure back into backwardation," Petromatrix strategist Olivier Jakob said.
"We currently observe crude oil stock draws and a prompt backwardation in Brent: we might not be back to the five-year average in stocks but some rebalancing is occurring."
Backwardation encourages those holding physical barrels of oil to release them from storage for processing, rather than retain them for sale at a later date.
The Organization of the Petroleum Exporting Countries, together with 11 of its rivals including Russia, agreed to cut crude output by 1.8 million barrels per day between January 2017 and March 2018.
Such a bullish backwardation has been slow to materialize and although the inversion in prices across the first three Brent futures contracts is worth only a few cents a barrel right now, OPEC's oil ministers might be tempted quietly to celebrate.
Reporting by Amanda Cooper; Editing by Dale Hudson