maybe the fats are visceral fats. you have to lose them first. meanwhile you have to retain your weight with non visceral fats.
nowadays there are many theories on these fats and how are they stored. thats why people here try the lchf diet. personally i dun see harm trying. but i cannot guarantee it works for everyone.
noone here knows how much fat you have in there and noone here can provide an answer. since you sees primary results, you should know it better that have it drop to the normal range will be good and best that you reverse it altogether.
i usually hate to give suggestion to anyone with diabetes. when people sacrifice their diet and did not get better, they will blame the fault. as if i gave them diabetes in the first place. some will tell you in the face that they are already used to the diet and still living.