A forecast "Super El Nino" in 2026-27 is unlikely to materially weaken global liquefied natural gas demand, Bernstein analysts said, even if the event ranks among the strongest on record. Using Japan as a proxy for Asia, they found LNG consumption there would fall only 2% despite a much sharper drop in heating demand.
Asian LNG imports face limited hit
Even in a worst-case scenario, the reduction in Asian LNG imports could be less than 1 billion cubic feet per day, or about 1% of global LNG imports, Bernstein said. The bank added that figure would fall within normal year-to-year fluctuations in demand.
Bernstein used Japan as its proxy for the region, given the country's exposure to El Nino-related weather patterns and its reliance on imported LNG. The analysts found a strong relationship between heating degree days, a measure of heating demand, and LNG consumption, but virtually no correlation between cooling degree days and LNG use.
Baseload demand cushions the swing
Under the Super El Nino scenario, Japanese winter heating degree days would fall 19%, but estimated LNG consumption would decline only 2% to 9.1 billion cubic feet per day. Bernstein attributed the muted demand response to a large baseload component of LNG consumption that stays relatively insensitive to weather.
Applying that same 2% reduction across the rest of Asia would cut regional LNG imports by less than 0.7 billion cubic feet per day, Bernstein said. That works out to roughly 1% of global LNG imports — a modest figure next to historical annual swings in Asian imports ranging from an 11% decline to a 23% increase.
Other forces matter more than weather
According to Bernstein: "Structural and market factors" such as storage levels, fuel-switching economics, LNG prices, coal markets and supply disruptions are likely to have a greater influence on demand than El Nino-related temperature changes, the analysts added.
Source: Investing.com
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