Reuters: Russian oil companies are forced to cut production due to a lack of buyers for their oil.

Russian oil companies are preparing to initiate forced production cuts as they are unable to sell millions of barrels of oil.

Source. This was reported by Reuters, citing three top executives from the oil industry, as well as traders and port agents.

According to the agency's sources, the "farewell" sanctions imposed by the Biden administration, which affected "Gazprom Neft," "Surgutneftegas," and 180 tankers from the "shadow fleet," have led to an excess of oil in Russia that cannot be exported abroad.

Export supplies from the ports of Ust-Luga and Primorsk on the Baltic Sea, as well as from Novorossiysk on the Black Sea, fell by 17% in January, while the cost of tanker freight for transporting oil through the Pacific port of Kozmino skyrocketed fivefold.

As a result, after a month of sanctions, oil companies have accumulated 17 million unsold barrels of oil drifting in tankers converted into floating storage.

By the beginning of summer, this volume could increase to 50 million barrels, analysts at Goldman Sachs predict.

There is nowhere to put this oil: there are virtually no large storage facilities in Russia, and those that exist were subjected to January drone strikes. It is also challenging to process the excess oil at refineries: 10% of refinery capacities have been lost due to UAV strikes, including the Ryazan, Volgograd, and Astrakhan refineries, and repairs will take months, according to Reuters sources.

They state that the only solution for oil producers is to cut production – this could begin in the coming months and accelerate if the issues with tankers and refineries remain unresolved.

One-fifth of the fleet that transported oil has been sanctioned, according to Reuters sources. Some ports in India and China have closed to these tankers. Both countries are hastily seeking alternatives in Saudi Arabia, Iraq, and the UAE.

According to estimates from Alfa-Bank, due to the sanctions, Russia could lose oil exports of up to 800,000 barrels per day – or one in three barrels that tankers carry by sea from ports. This would deprive the economy of approximately $50 billion in export revenue annually and could lead to the devaluation of the ruble to levels above 130 per dollar, experts reported.

Background. Recall that Politico reported that European countries are privately discussing the mass detention of Russian tankers in the Baltic Sea. Additionally, countries may act independently in this direction to confiscate Russian vessels.