Mounting sea-borne inventories and US-India trade shift squeeze Kremlin oil revenues
Russian crude oil output continued its downward slide in January for the second consecutive month. This decline stems from intensifying market access constraints triggered by United States sanctions.
According to Bloomberg sources, Russia extracted an average of 9.28 million barrels per day (bpd). This figure represents a drop of 46,000 bpd from December and remains nearly 300,000 bpd below the allowed OPEC+ quota.
Official data regarding production and exports remain classified by Moscow. The Russian Ministry of Energy has declined to comment on January’s performance or its future strategic outlook.
Floating storage hits record highs
The production cut coincides with a surge in Russian crude volumes stored on tankers. At the beginning of February, sea-borne inventories reached 143 million barrels—nearly double the volume recorded during the same period last year.
Export pressure intensified following Donald Trump’s announcement to eliminate a 25% tariff on Indian goods. In exchange, India agreed to halt its purchases of Russian crude oil.
Consequently, tankers are now diverting toward China. However, analysts remain skeptical about the Chinese market's capacity to absorb these additional volumes.
Fiscal stability under threat
This production decline poses a significant risk to the Russian budget. In 2025, the oil and gas sector accounted for approximately 23% of total government revenue.
January budget receipts from oil have already hit a five-year low. This fiscal erosion is driven by lower global prices, deepening discounts, and a strengthening ruble.
Moscow further risks losing market share to other OPEC+ members. The group has opted to maintain current production levels through the first quarter of 2026, leaving Russia’s post-March strategy uncertain.
Russian Deputy Prime Minister Alexander Novak recently stated that OPEC+ anticipates a demand recovery starting in March. He emphasized the need for a "cautious approach" regarding any potential production increases.
Translation by Iurie Tataru
