With a Super El Nino, analyst asks: What happens to LNG demand?

A research note from Bernstein analysts suggests that a "Super El Nino" forecast for 2026-27 may not have a significant impact on global liquefied natural gas (LNG) demand. Although the weather event could lead to warmer winters in Asia, the anticipated reduction in Asian LNG imports is projected to be less than 1 billion cubic feet per day (BCFD), or around 1% of global LNG imports.

This decline would be within the range of normal year-to-year fluctuations. The analysts used Japan as a stand-in for Asia due to its vulnerability to El Nino-related weather patterns and its dependence on imported LNG. They discovered a strong correlation between heating degree days, a measure of heating demand, and LNG consumption, but found virtually no link between cooling degree days and LNG usage.

In their Super El Nino scenario, Japanese winter heating degree days would drop by 19%, yet estimated LNG consumption would only decrease by 2% to 9.1 BCFD. The analysts suggested that the relatively modest demand response is due to a large baseload component of LNG consumption that remains relatively unaffected by weather changes.

Implementing the 2% reduction to the rest of Asia would decrease regional LNG imports by less than 0.7 BCFD, which is approximately 1% of global LNG imports. When compared to historical annual swings in Asian imports, which have ranged from an 11% decline to a 23% increase, this projected reduction is considerably less. The analysts emphasized that factors like storage levels, fuel-switching economics, LNG prices, coal markets, and supply disruptions are more likely to influence demand than El Nino-related temperature variations.