The spot WTI crude oil price, traded on the Chicago Mercantile Exchange, ran up for the third straight day and settled at U.S. $48.54 a barrel, up 7.13% on Monday, after the Energy Information Administration (EIA) lowered its output estimates for U.S. domestic crude oil production in the first five months of the year by between 40,000 and 130,000 barrels per day (bpd) each month, due to new survey methodology. The EIA also said that June production fell by 100,000 bpd to 9.3 million bpd, bringing total production in the first half of the year to 9.4 million barrels a day.

The surge in crude oil price on Monday could also be due in part to a report floating around suggesting that OPEC is increasingly willing to talk to other oil producers about curbing output, but on a level playing field. Traders have been running up crude oil prices since last Thursday after Venezuela asked OPEC for an emergency meeting. The support of crude oil prices could also have come from Mexico’s government, as it spent U.S. $1.06 billion for put options to hedge oil exports for next year at an average of U.S. $49 a barrel. 

According to Citi in a Reuters report, "Sharp gains over the past three trading sessions were driven by a combination of short covering and chart-readers again looking to call a bottom falsely,". Citi sent out a stern warning that crude oil prices may yet test new lows before year's end.

As of August 25, there are 474,160 long positions of non-commercial contracts of light sweet crude oil futures, traded on the New York Mercantile Exchange by hedge funds and dealers, an increase of 962 long positions from last week, according to the Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) each Friday. 

This is compared to about 258,597 short positions, a decrease of 4,037 short positions from last week where light sweet crude oil contracts are traded in units of 1,000 barrels. Net long positions have increased about 4,999 contracts, reflecting the slide in crude oil prices last week as traders covered their short positions.

Technically, the crude oil price has been moving in a narrow descending wedge chart pattern since June. The crude price broke down through the lower trendline support of the descending wedge during the China stock market rout and hit a 6-year low last Monday at U.S. $37.75 a barrel. Venezuela’s headline news on Thursday sent the crude oil price soaring and broke out the descending wedge. 

The conservative projected price target for a descending wedge breakout event is U.S. $48.64 a barrel. More bullish headline news for crude oil in the coming days could keep the price within the trading range between U.S. $48.64 and U.S. $52.50 a barrel, or the neckline of a potential crude oil head-and-shoulders. The crude oil price could fall hard, if bullish headline news fades.

The headline news risk for crude oil prices is the up-coming vote by the U.S. Senate. In early August, Iranian Oil Minister Bijan Namdar Zanganeh said that Iran can increase its production by 500,000 bpd within a week after sanctions end, and by 1 million bpd within a month following that. The P5+1 countries, which include the U.S., Russia, U.K., France, China and Germany, reached a nuclear deal with Iran on July 14. 

The U.S. Congress will vote to accept or reject the agreement before the September 17 deadline. The nuclear deal proposed by the Obama administration is now backed by 31 senators, but requires 34 votes in the Senate to ensure lawmakers cannot kill the deal, said Reuters.