An expert and a former official in the Russian oil industry said that the shortage of storage capacities in Russia reduces the options available to it in the upcoming talks with countries gathering what is known as “OPEC +” on reducing oil production to stop its decline in global prices.
Bloomberg News quoted Dmitry Perivalov, former vice president of the Russian oil company Slavneft & Gas and an independent trader in the oil market now, saying that Russia has not built huge warehouses to store oil as the United States and Saudi Arabia have done, along with a sharp decline in demand for crude as a result of a pandemic.
The new coronavirus will make it compelled to reduce its oil production even if it does not reach an agreement with other oil countries.
Bloomberg pointed to the decline in global demand for oil by between 20% and 30% due to economic closures in many countries of the world to limit the spread of the new coronavirus.
At the same time, refineries in various parts of the world have sharply reduced their production in light of the decline in demand for fuel, which made the oil producing countries suffer for buyers of crude shipments.
At the same time, oil companies around the world face the prospects of reducing their production with warehouses full of crude, but Russia is the least able to store the extracted crude compared to the rest of the other major oil countries.
Igor Diomin, a spokesman for Transneft, which operates a network of pipelines and oil depots in Russia, said that the storage capacity of warehouses in Russia does not exceed 23 million cubic meters, equivalent to 145 million barrels, or about Russia’s production, in just two weeks.
On the other hand, the storage capacity of warehouses in the United States is more than 10 times the Russian storage capacity.
According to Diomin, Transneft cannot use the full capacity of these warehouses for more than one month, as it must keep an empty part of the warehouse to meet any emergency conditions related to shipping and port operations.
This comes as Russia, Saudi Arabia and other member states are preparing for what is called the “OPEC +” gathering for a new round of talks during the current week on reducing oil supplies to support crude prices, which fell to record levels against the backdrop of the price war between oil countries with the decline in global demand.