Crude oil futures for delivery in March 15 [CLH15.NYM] surged 4.45% on Monday to an intraday high of U.S. $53.99 per barrel on the New York Mercantile Exchange (NYMEX) as the Organization of Petroleum Exporting Countries (OPEC) said the U.S. oil supply growth will decline to about 820,000 barrels a day in 2015, or about 50% less than the U.S. oil supply growth in 2014. Let's put it this way, U.S. oil production will still grow, but less than last year.

Last Friday, Baker Hughes [NYSE:BHI], one of the world's largest oilfield services companies, issued its weekly report saying that the U.S. oil drilling rig count fell to 1,140 in the first week of February, down over 41% from the record highs of 1,609 set in October 2014.

Edward Morse, Citigroup's global head of commodity research, issued a bearish report for crude oil on Monday which said, “the recent surge in oil prices is just a head-fake and oil as cheap as U.S. $20 a barrel may soon be on the way as oversupply fills storage tanks close to capacity”.

China’s Customs Bureau said on Sunday that China imported 28 million tonnes of crude oil, or an equivalent to 6.59 million barrels per day, in January, down 7.9% from December's record level of 31 million tons, or 7.2 million barrels per day. 

China apparently is cutting back on its strategic stocking of crude oil imports for whatever reasons. Maybe China also sees cheaper oil ahead. The strategic petroleum reserves of at least 500 million barrels of oil is supposed to be in place by 2020. 

The Crude Oil Volatility Index (OVX), traded on the Chicago Board Options Exchange (CBOE), tumbled 9.07% to close at 56 on Monday, back below the 58.43 technical resistance level, or ~ 50% Fibonacci retracement. For reference, any OVX level above 25 is considered to be elevated.

The OVX is a crude oil derivative which measures the market’s expectation of 30-day volatility of the United States Oil Fund ETF [NYSE:USO], primarily the near month WTI crude oil futures contracts traded on the NYMEX. In short, high OVX readings usually mean traders see significant risks that crude oil price futures will move sharply lower.

From a technical viewpoint, the WTIC crude prices were forming a short-term double bottom in January. The double bottom might have been confirmed last Tuesday as the crude oil price broke out the January 2007 resistance level at U.S. $50.55 per barrel. 

A falling wedge breakout could send the crude oil prices to retest the U.S. $54.24 per barrel resistance, set last week. Two more head resistances are U.S. $57.68 per barrel and U.S. $62.84 per barrel, or 61.8% Fibonacci retracement.

It appears that the Saudis are winning the first battle in the oil patch as they continue to pump 11.6 million barrels per day in 2015, while the U.S. slashes its oil production.