By Rebecca Feng

Dozens of tankers filled with Russian oil are floating at sea without buyers. Western powers are seizing the aging ships the country relies upon. Buyers of Russian oil are demanding the steepest discount to global oil prices since the early months of the war in Ukraine.

It all spells crunchtime from Moscow's most important economic engine.

The West has tried to squeeze Russia's oil industry since President Vladimir Putin invaded Ukraine in 2022. Russia successfully evaded sanctions, rebuilt its own shadow shipping fleet and found new buyers for its crude.

But a fresh wave of pressure, a combination of European sanctions against specific ships, dramatic military ship seizures on the high seas, and President Trump's efforts to put a wedge between Russia and India, have left Moscow's most important industry in a precarious state.

Russia's main grade of crude, known as Urals, trades for around $45 a barrel, a record $27 below the international benchmark Brent, according to commodities-data firm Argus Media.

That is already well below the $59 a barrel needed for Russia's fiscal budget to balance in 2026. And it is inching toward the production break-even price, below which Russian oil companies lose money. Analysts estimate this to be between $20 and $25 a barrel. In January, Russia's oil and gas revenue was the lowest since July 2020.

"The vulnerability on the budget side is quite significant, and this is happening at a time when the economy is also slowing or almost stagnating," said Benjamin Hilgenstock, director of the Center for Geoeconomics and Resilience at the Kyiv School of Economics Institute.

In January, the International Monetary Fund downgraded its growth forecasts for Russia to just 0.6% in 2025 and 0.8% in 2026. Other than the pandemic years, it would be the weakest growth since the country annexed Crimea in 2014.

Barrels at sea

In a sign of Russia's difficulties in selling oil, some 143 million barrels are floating on the water as of Feb. 10, waiting for buyers, according to ship-tracking company Vortexa. That is around half a month of Russian production based on the country's 2025 production levels.

Most of these barrels are near ports in Russia, India and China, or around ship-to-ship transfer zones along major trading routes, such as open waters near Malaysia, said Emma Li, lead China oil-market analyst at Vortexa.

Traders are at a loss to find buyers for all these idle barrels, especially given the ample supply of oil in global markets.

Traditional buyers such as Indian and Chinese state refineries are staying cautious. To attract private buyers in China, floating Russian cargoes increasingly need to lower prices to compete with Iranian grades, which are typically sold at a steeper discount.

"The timing of when these barrels are absorbed will largely depend on the level of discounts available to potential buyers," Li said.

If the volume of oil on water doesn't decrease, Russia will eventually have to slow production as it runs out of space to store oil, analysts said.

There are signs that China's so-called teapot refineries, independent outfits that often operate without links to Western finance and insurance, are working through some of the glut, according to Natasha Kaneva, head of global commodities strategy at JPMorgan.

In January, the world's second-largest economy imported a record 1.73 million barrels a day of Russian crude, nearly 50% above the 2025 average of 1.16 million barrels a day, according to KSE Institute analysis based on data from ship-tracking service Kpler. Analysts say there have been further purchases in the start of February.

But teapot refineries, clustered in China's Shandong, a province sitting on the lower reaches of the Yellow River, are likely to drive a hard bargain. "When oil is sitting on a tanker off the coast, hoping for a buyer, the seller is not in a good negotiating position," said Ronald Smith, founding partner of Texas-based Emerging Markets Oil and Gas Consulting Partners.

There might be a limit to what China is willing to absorb. Beijing has traditionally observed an informal threshold of not letting a single country account for more than 20% of its crude imports. Russia's share hit 17.5% in 2025, according to China customs data.

India pulls back

India, until recently one of Russia's biggest customers, retreated from purchases after sanctions imposed by the U.S. on Russia's two oil companies and by the European Union on products made from Russian crude oil.

Also at play: Trump last year imposed 50% tariffs on India, tied in part to reducing Russian oil purchases. Last week, Trump said India had agreed to stop buying Russian oil in exchange for lower tariff rates.

Analysts have said that it is difficult for the world's most populous country to cut its Russian crude purchases to zero, but even a modest reduction could have a discernible effect on Moscow.

In January, India recorded its lowest monthly purchase of Russian crude since December 2022, at just 1.14 million barrels a day, according to KSE Institute. India's imports of Russian oil products also fell significantly.

Shadow fleet under pressure

Also looming over Russia's oil industry: A series of recent ship seizures by the U.S. and Europe has made it riskier to operate Moscow's fleet of shadow tankers. These ships, with opaque ownership that also operate without Western insurance and finance, transported nearly 80% of its oil in 2025.

French forces last month seized a tanker called the Grinch in the Mediterranean Sea, a transit route for oil tankers that carry Russian crude to Asia. This week, U.S. forces seized the Aquila II. It was loaded with Venezuelan oil at the time but had previously transported Russian crude.

"If the shadow-fleet attacks become frequent enough, it may discourage sellers as it presents too much of a risk for them," said Naveen Das, a senior crude-oil analyst at Kpler. For now, he said, the potential reward still outstrips the risk of the tanker being seized.

Write to Rebecca Feng at rebecca.feng@wsj.com

(END) Dow Jones Newswires

February 11, 2026 23:00 ET (04:00 GMT)

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