The Eurasian Policy & Energy Hub

Oil production has outstripped demand to the point that the world has a 1-billion-barrel surplus that will take at least five years to work off, industry analysts say.

Until the backlog is gone, oil prices will wallow, although where they will be at in a given month or year is hard to predict, the experts say.

The surplus began building in 2014 due to a surge in U.S. shale production.

The current low price of oil — about $30 a barrel — has prompted many European and American producers to reduce or halt their production.

But major producers such as Saudi Arabia and Russia have not reduced their output to try to drive up prices, and Iran is ramping up production now that the United Nations has lifted economic sanctions against it. An agreement under which Iran pledged to forego nuclear weapons led to the lifting.

Another factor that will keep the oil glut from shrinking quickly is new projects coming on line, such as Kazakhstan’s Kashagan field, one of the world’s biggest. It is set to start production this year after years of delays.

Saudi Arabia and Russia recently agreed to maintain their current output as a first step toward nudging oil prices back up. The fact that they failed to agree to a production cut, however, will keep the surplus growing until 2017, analysts predict. It won’t be eliminated until at least 2021, they say.

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