Reuters: Russia is running out of oil storage

Due to US sanctions, Russia is reducing exports and its storage facilities may soon be overflowing, which will lead to a reduction in production, writes Reuters. There are no storage facilities in Russia as such, experts note, believing that a longer period will show the real situation and exports will get better in the spring.

"Russian oil producers may have to drastically reduce production in the coming months, as increasing pressure from US President Donald Trump and European powers limits the country's exports, and its storage facilities are filling up," writes Reuters.

The agency cites Kpler data that the current export of Russian oil by tankers is 2.8 million barrels per day, whereas in January it was at 3.4 million barrels, and in December — 3.8 million barrels.

"At the same time, the volume of Russian oil stored on ships has reached a record level in recent months, exceeding 150 million barrels, and many tankers have also slowed down — both factors indicate a decrease in demand," the agency continues.

The agency considers the main reason for the reduction of imports to India, which, according to Donald Trump, has pledged to abandon raw materials from Russia in the framework of a new trade deal.

Kpler estimates that onshore oil storage facilities in Russia accounts for more than 30 million barrels and they are 51% full. In addition, Russia can store another 100 million in the oil pipelines themselves, according to the analytical agency.

"But even this buffer may not be enough. Russia produces about 9.3 million barrels of oil per day, about half of which is exported. At this rate, onshore storage facilities can fill up quickly if exports remain limited, leaving producers with few options other than reducing production," Reuters continues.

The agency cites the forecast of Rystad Energy, according to which oil production in Russia may be reduced by 300 thousand barrels per day in the period from March to May.

Igor Yushkov, a leading analyst at FNEB and an expert at the Financial University under the Government of Russia, notes: Reuters proceeds from the fact that India allegedly reduces purchases of Russian oil and therefore Russia has nowhere to put it and it pumps it into storage.

"But it is important to understand that, first of all, China is increasing purchases from us, which has lost Venezuelan oil and is buying part of Indian volumes. At the same time, some of the oil still goes to India, it just comes from an unknown supplier," the expert says.

According to him, in principle, there are no oil storage facilities in Russia as such.

"Our oil storage facilities are deposits. Otherwise, these are only technological tanks that are located along oil pipelines, in ports, at refineries, in order to compensate for short—term disruptions in the form of stormy weather, for example," Igor Yushkov continues.

For oil in tankers, the leading analyst of the FNEB believes that the downtime of ships is due to the unwillingness of sellers to give their oil at a big discount and in anticipation of higher prices.

"In addition, the decrease in supplies may be due to repairs at the fields and the fact that oil prices are quite low for the most complex fields," says Igor Yushkov.

Maxim Shaposhnikov, advisor to the manager of the Industrial Code Fund, notes that these are not all the factors that can affect supplies.

"Situationally, exports may decrease due to the ice situation in the Baltic, especially against the background of the Chinese New Year," says Maxim Shaposhnikov.

Reuters expects that the reduction in production in Russia may start in March. At the same time, Igor Yushkov expects that recovery will begin in the spring.

"In general, the situation will improve in the near future, when the new car season begins. And I think that, in general, it will show that Russia is pumping about the same amount as last year," adds the leading analyst of the FNEB.