A double whammy of icy conditions in the oil fields in the Russian Far East and the major non-OPEC producer’s latest promise to cut production could lead to a decline in Sokol and Sakhalin Blend crude exports in the first quarter, market sources said Monday.

Heading into the second half of the March trading cycle, clarity over the loading dates for light sweet Far East Russian grades was still lacking and market participants continued to await the release of full loading details for the month.

The general expectation, however, was that exports of the Far East Russian grades for Q1 may drop from the previous quarter as production and logistics are hampered by extreme cold winter conditions, traders said.

“Sokol’s final [March-loading] program will only be [confirmed by] next Friday … it’s much later than usual,” said a source with direct knowledge of the light sweet crude’s monthly exports, indicating that monthly loading details for the light sweet crude are typically announced within the first week of every calendar month.

Abnormally cold weather has prevailed in January in many parts of Siberia, with weather services registering temperatures of around minus 50 C last week, some 15 C below normal.

Meanwhile, the waters around the DeKastri terminal near Sakhalin Island, as of Sunday, were at sub-zero temperatures, with at least 40% of the sea surface in that area covered in ice, the Hydro-meteorological Centre of Russia website showed Monday.

“Suppliers selling their [Sokol and Sakhalin Blend] cargoes on a CFR delivered basis need to prepare ice-breaking vessels,” a trader with a Japanese refining company said previously.

“[Production and] loading operations can take longer in frozen environment as well … there are lots of planning to do,” the trader added. Furthermore, “Russia has agreed to cut its output as well,” said a North Asian crude trader. “It seems the [very cold] weather [conditions] would naturally help them to implement that [production cut agreement],” he added.

Late last year, non-OPEC producers, led by Russia, had agreed to cut output by 558,000 b/d in the first half of 2017, with Russia set to cut 300,000 b/d. Russia is one of five countries on a monitoring committee overseeing the implementation of the deal.

Russia has started reducing its crude output as part of a production-cut deal with OPEC, with the fall in the first 10 days of the year higher than initially expected, energy minister Alexander Novak said last week. FEB, MAR EXPORTS SEEN LOWER VS JAN

The last Far East Russian loading program seen by S&P Global Platts indicated that a total of 11 cargoes of Sokol crude would be exported in February, less than around 12-13 cargoes expected to load in January. ExxonMobil holds two cargoes for loading around February 8 and February 19, while Rosneft holds four cargoes for February 5, 9, 16 and 24. Marubeni, Itochu and Japex, members of the Tokyo-based Sakhalin Oil and Gas Development Co., also have one cargo each for loading in February.

India’s ONGC Videsh Ltd. sold two cargoes for loading over February 9-15 and February 21-27 via spot tenders in the previous trading cycle.

Meanwhile, Sakhalin Energy was said to have sold a total of four 730,000-barrel cargo of Sakhalin Blend crude for loading over February 1-7, 9-15, 14-20 and 19-25 to South Korean and Japanese buyers, compared to a total of six cargoes sold for loading in January.

“Probably the long delay [in the release of March Sokol and Sakhalin program] means the producers are planning some kind of [output] cut, whether it be due to Russia’s policy or cold weather or both … we might see rather low export volume for March,” said another North Asian crude trader. Still, traders also pointed out that any Russian output reduction plans would be mostly geared toward the crude grades produced in the country’s more productive northern and western regions.

“[Sakhalin] output is relatively smaller than other regions [in Russia] … we still might see a cargo or two less [for Sokol and Sakhalin Blend in March compared to February] but the bulk of the Russian production cut [if any] would be in the Siberia and Ural regions,” said the first North Asian crude trader.

Source: Platts