High Storage Levels, Low Oil Prices

After almost reaching $55 per barrel (bbl), oil prices are again falling. What makes this decline particularly baffling is that in late 2016, after seeing prices languish for two years, the Organization of Oil Producing Countries (OPEC) announced that it, along with non-OPEC members such as Russia, would collectively reduce production by 1.8 million bbl/day, or 2% of global supply, starting January 1st. Many observers thought that removing that much supply would stop inventory growth and put upward pressure on prices. After the decision to curtail pumping was announced, oil prices, as expected, quickly jumped from about $43/bbl to close to $55/bbl. Recently, however, oil prices have again started falling. The question is why, and is this decline more likely to be temporary or permanent?