Russia’s Oil Storage Nears Capacity as India Cuts Imports

Russia’s oil storage capacity is nearing its limit as producers face growing difficulties selling crude, particularly in India, according to data analyzed by Kpler and Rystad Energy. The situation threatens to force production cuts in the coming months, potentially impacting global oil markets.

India, which became the largest buyer of seaborne Urals crude, slashed its imports by one-third in January to 1.1 million barrels per day (bpd), down from an average of 1.7 million bpd last year. This reduction has left approximately 150 million barrels of Russian oil stranded on tankers, and overall Russian oil exports are declining – falling to around 2.8 million bpd in February from 3.4 million bpd in January.

Russia’s onshore storage facilities can hold roughly 32 million barrels, equivalent to only three to four days of current production. Approximately half of this capacity is already utilized, according to Kpler’s satellite data analysis. This limited storage capacity is a critical constraint.

The inability to store oil will compel companies to reduce output, potentially by around 300,000 bpd by March-April, Rystad Energy forecasts. Some relief may come from the extensive pipeline network operated by Transneft, which can accommodate around 100 million barrels – roughly 11 days of production. However, even this additional capacity is insufficient to absorb the current surplus.

Russian oil companies have already begun to curtail production, reducing output by 100,000 bpd in December and an additional 26,000 bpd in January, sources familiar with confidential government statistics have reported. This suggests the pressure on producers is already materializing.

The shift in India’s purchasing patterns is driven, in part, by a trade agreement with the United States, which encourages India to reduce reliance on Russian oil and increase imports from the U.S. And potentially Venezuela. US President Donald Trump announced this agreement with Indian Prime Minister Narendra Modi, including provisions for tariff reductions alongside the oil import shift. Concerns over potential U.S. Strikes on Iran are also influencing India’s decisions, prompting a search for more stable supply sources.

As India scales back purchases, China is stepping in to absorb more Russian crude. Russian crude shipments to China are estimated to reach a new record high of 2.07 million bpd in February, surpassing January’s 1.7 million bpd. Kpler data shows February imports at 2.083 million bpd, up from 1.718 million bpd in January. This trend is particularly pronounced among independent Chinese refiners, known as “teapots,” who favor discounted Russian supplies.

However, even increased demand from China may not fully offset the decline in Indian purchases. Russian oil sellers are already cutting prices to attract Chinese buyers, with Urals crude trading at a discount of $9 to $11 per barrel below benchmark ICE Brent for January/February deliveries – the lowest discount in years. This price competition reflects the growing urgency to move oil.

JPMorgan analysts anticipate India will import between 800,000 to 1 million bpd of Russian crude going forward, a significant reduction from previous levels. The combination of reduced Indian demand and increased Chinese intake is reshaping the landscape of Russian oil exports.

The situation is further complicated by a European Union ban on imports of fuels refined from Russian crude, which came into effect last month. This restriction limits Russia’s options for processing and exporting its oil, adding to the storage challenges. Tightening pressure from the US and Europe, including sanctions and tariffs imposed by President Trump on India’s purchases, is exacerbating the problem.

While Russia has successfully redirected a significant portion of its seaborne shipments to China, India, and Turkey since the imposition of Western sanctions, this strategy is now under strain. The reliance on a “shadow fleet” of aging tankers and steep discounts has allowed Russia to maintain export volumes, but these tactics are becoming less sustainable as geopolitical pressures mount and storage capacity dwindles.

The coming months will be critical for Russian oil producers. The need to cut production, coupled with the logistical challenges of managing excess inventory, presents a significant test for the industry and could have broader implications for global oil supply and prices.