Sanctions pressure pushes Russia toward possible oil output cuts
Photo: Russia faces oil production cuts as storage fills up (Getty Images)
Russia may sharply reduce oil production in the near future due to mounting pressure from the US administration and the European Union, leading to storage overflows, Reuters reports.
According to data from analytics firm Kpler, Russia’s seaborne oil exports, which stood at 3.8 million barrels per day in December, fell to 3.4 million in January and dropped further to 2.8 million barrels per day in February.
At the same time, the volume of oil stored on tankers in recent months has reached a record level of more than 150 million barrels. Many vessels have also slowed their speed, signaling weakening demand.
Analysts believe pressure on Russian exports could intensify in the coming months, as India, Russia’s largest oil buyer in 2025, prepares to curb purchases as part of a trade deal with the United States.
Domestic oil storage
The slowdown in purchases is triggering a negative chain reaction in Russia’s oil logistics. Longer voyages by the so-called shadow fleet are tying up tankers and reducing the number of vessels that can store oil at sea. As a result, Russia is being forced to redirect more oil to domestic storage facilities.
The size of Russia’s onshore storage capacity is unknown, but Reuters reports that it is limited. According to Kpler, onshore oil inventories currently stand at around 16 million barrels, or roughly 51% of total capacity.
In addition, Russia may use parts of its pipeline network to store oil. This could increase total onshore storage capacity to about 100 million barrels, according to Kpler estimates.
Production cuts
However, even that capacity may prove insufficient, as Russia produces about 9.3 million barrels of oil per day, half of which is exported. If export restrictions persist, onshore storage could fill up quickly, leaving production cuts as the only viable option, experts say.
Earlier, the US Treasury issued a license allowing American companies to supply Venezuela with equipment and technology for oil and gas production. At the same time, the license prohibits any transactions for Russia and China.
