Reuters: Russian Oil Producers Did Not Expect Such An Effect From Trump's Decision

The Russian Federation has begun to choke on oil.

Russia's oil storage capacity is nearing exhaustion as oil companies face increasing difficulties in selling to India, Reuters wrote, citing analysts Kpler and Rystad Energy.

India, which is the largest buyer of seaborne Urals shipments, cut its imports by a third in January to 1.1 million bpd from an average of 1.7 million bpd last year. As a result, about 150 million barrels taken out of Russian ports by tankers are "stuck" at sea, and total Russian oil exports have begun to fall: in February they are about 2.8 million barrels per day against 3.4 million in January.

The capacity of onshore storage facilities allows Russia to store only about 32 million barrels, which is only 3-4 days of current production. At the same time, about half of this volume has already been utilized, Kpler calculated on the basis of satellite images.

Inability to store oil will lead to the fact that oil companies will be forced to reduce production - by about 300 thousand barrels per day by March-April, Rystad Energy forecasts. The vast Transneft pipeline network can partially solve the problem of unsold oil - it can hold about 100 million barrels in total, Kpler estimates. However, even this volume is small compared to the scale of production - about 11 days of production.

Because of difficulties with oil sales, Russian oil producers are already reducing production - by 100 thousand barrels per day in December and another 26 thousand - in January, sources familiar with classified government statistics told Bloomberg.

The decline in Russian production is fixed despite the fact that the OPEC+ deal allows to still increase: now the Russian quota is 9.57 million barrels per day against 8.97 million in the summer, when there were restrictions on production. But in fact the oil industry produces 9.28 million barrels per day - that is 300 thousand less than the quota.

At the end of 2025 oil production in Russia has fallen to a 15-year low of 512 million tons. According to Gazprombank's estimates, oil companies have lost about $33 billion in foreign currency earnings due to difficulties with exports and the need to offer huge discounts of almost $30 per barrel.

The average cost of Urals, Russia's main export grade, has fallen to $40 per barrel, although the budget includes $59, and to balance it, prices need to be even higher - $93 per barrel, according to estimates by Alfa Bank. Oil and gas budget revenues in early 2026 have renewed their lows since the pandemic: in January it was 393 billion rubles - half as much as in the same month a year earlier.

At the company level, the main blow will fall on Rosneft and Lukoil through increased price pressure and the growth of logistical discounts, notes Freedom Finance analyst Vladimir Chernov: "Export revenues are shrinking, especially for projects with high production costs. At this Urals price, the space for investments and dividends remains limited."

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