Russian Urals crude offshore storage

Saturday 31 January 2026

In the winter of 2026 a small but telling spectacle has begun to repeat itself on the maritime maps used by tanker brokers and sanctions analysts alike. Vessels that should be discharging cargoes and returning promptly for fresh loadings are instead lingering off coasts and chokepoints, moving slowly, loitering in holding areas, or switching destinations without ever quite arriving. The commodity aboard them is not obscure: Russia’s flagship Urals crude. The behaviour is unusual: not the purposeful transit of oil from producer to refiner, but an improvised, expensive form of offshore warehousing.

Reuters reported on 30 January 2026 that roughly 19 million barrels of Urals crude, loaded before mid-December, were still in transit or awaiting discharge, with some ships deliberately slowing in ways that effectively convert them into floating storage. Other vessel-tracking reporting has suggested a much larger build-up across Russia’s seaborne crude more broadly, particularly as Indian buying has weakened, though estimates vary materially by methodology and definition. Either way, the pattern matters more than the exact number: Russian crude is taking longer to sell, longer to deliver and longer to turn into money.

Why would a major oil exporter tolerate such a wasteful arrangement? Because it is the visible symptom of three pressures converging at once: weakening demand amongst Russia’s key “non-Western” customers; tightening sanctions enforcement over shipping and finance; and a crude market whose economics no longer reward long, uncertain voyages.

Floating storage is rarely anyone’s first choice. Oil is stored at sea when it cannot be sold onshore at a tolerable price, or when the seller hopes that waiting will improve the price, the legal risk, or the availability of a buyer. In normal times a trader may do this because the forward market is in contango, meaning future prices exceed spot prices by enough to pay for storage and financing. In Russia’s case today, the incentives are more defensive than speculative: the cargo is at sea because selling it has become slower, more conditional and more politically fraught.

Start with the buyers. Since 2022, India became the decisive outlet for Urals, absorbing volumes that could no longer go directly to Europe. That trade depended on a delicate bargain: India received discounted crude and Russia received hard currency and a route to market. But the bargain was never purely commercial. It required banks, insurers, shipowners and port services to believe that the transaction would not entangle them in sanctions enforcement or reputational risk. That belief is now less secure. Reuters has linked the recent build-up of Urals offshore to a pullback by key importers, including India and Turkey, in response to intensified Western sanctions pressure. 

There is also the matter of price and legality. The “price cap” regime, whatever its imperfections, has created a compliance architecture in which many mainstream maritime and financial service providers demand paperwork assurance that Russian oil has been sold at or below the cap if Western services are used. In parallel coalition countries have repeatedly sought to tighten the cap’s impact by enforcement actions, including designations of tankers and intermediaries. As the web of restrictions has widened, the practical problem for Russian exporters has become not merely finding a refiner willing to buy, but finding a route and a service chain willing to carry.

A further complication sits downstream. Europe’s direct embargo on Russian crude was only the first stage. The European Union has also sought to close the “laundromat” whereby Russian crude is refined elsewhere and then re-enters European markets as ostensibly non-Russian products. Reporting in late January 2026 pointed to an EU ban on imports of oil products made from Russian crude taking effect on 21 January 2026, a development that, if enforced effectively, reduces the attractiveness of refining Russian barrels in third countries for resale into Europe. If a refiner cannot freely sell the resulting diesel or jet fuel into premium markets, it either demands a deeper discount on the crude, or it buys less of it.

When these constraints bite at once, the oil does not disappear. It backs up. Russia can divert some cargoes to China, and there has been reporting of such diversion, but China’s refiners bargain hard, and additional volumes tend to widen discounts rather than preserve revenues.  Meanwhile, Turkey, which has played an important intermediary role, also faces its own exposure to Western financial pressure and compliance risk. The result is the maritime version of a lorry queue: cargoes waiting for a slot at a destination, or for a buyer prepared to accept the paperwork, the risk and the price.

The shipping layer makes the problem self-reinforcing. A tanker that lingers is a tanker not available for the next voyage. As Reuters has noted, extended waiting times tighten tanker availability and push freight rates upwards. In other words the very act of storing crude offshore increases the cost of exporting crude offshore. That cost then feeds back into the discounts demanded by buyers, because buyers know the seller is paying demurrage, burning fuel and absorbing time.

For Russia’s public finances, the consequences are direct and compounding. Oil revenues are not merely a profit centre for producers; they are a fiscal pillar for the state. When Urals sells at a steep discount to Brent, the state collects less export duty and less profit-based taxation, and the ruble value of those revenues becomes hostage to currency moves and to domestic budget assumptions. The Financial Times recently reported that Russia’s energy revenues fell sharply in 2025, with the Urals discount widening markedly, aggravating budgetary strain. Offshore storage does not itself cause the discount, but she is evidence that the discount is not clearing the market quickly enough.

There is a second-order consequence that is often missed: storage at sea shifts bargaining power from seller to buyer. A cargo anchored off Oman or circling slowly is a cargo whose seller is bleeding money daily. The buyer knows this. The seller’s alternative is limited: bring the cargo home to already constrained storage and blending capacity, or shut in production at the fields, which can be technically and politically difficult. In such conditions the “market price” becomes less a neutral intersection of supply and demand and more an extraction of distress. Discounts widen not simply because the crude is less desirable, but because the seller is more cornered.

Over time, sustained floating storage can also erode Russia’s logistical resilience. Russia’s post-2022 export model has relied heavily on a patchwork fleet of older tankers, opaque ownership structures and complex routing that sometimes includes ship-to-ship transfers. That system functions while it has enough hulls, enough insurance improvisation and enough permissive ports. But a system that is already strained becomes brittle if vessels are immobilised as storage, if enforcement actions remove tankers from service, or if the cost of chartering rises faster than the revenue from the barrel. KSE’s Russian Oil Tracker has documented the sanctioning coalition’s growing focus on tankers involved in sanctions evasion, a trend that increases uncertainty for any voyage that depends upon marginal compliance. 

The macroeconomic danger for Russia is therefore not a single dramatic event but an accumulation of frictions. Frictions mean delays. Delays mean costs. Costs mean discounts. Discounts mean fiscal stress. Fiscal stress, in a wartime economy with a large security apparatus and a politically sensitive social contract, tends to be managed by drawing down reserves, increasing domestic borrowing, pressuring the central bank, or cutting non-military spending. Each of those choices carries its own future cost.

None of this implies that Russia is about to “run out” of customers. Oil is too fungible, and too essential, for that. But it does imply that Russia’s oil is becoming less like a sovereign asset and more like a distressed commodity: sellable, certainly, but on worse terms, with more intermediaries taking a cut, with more of the margin consumed by freight, insurance improvisation and delay. Floating storage is the physical manifestation of that deterioration, visible on the sea before it appears in the budget tables.

For Ukraine and her partners the strategic significance is plain. A barrel that sits offshore is a barrel that is not yet financing the Kremlin. But there is also a caution here. If sanctions and enforcement actions produce only a shift in trade patterns, then the effect is limited. Their efficacy lies in producing cumulative friction, such that each additional barrel is harder to move, slower to monetise and cheaper when it finally sells. The growing presence of Urals barrels in offshore storage suggests that, at least for now, that friction is increasing.