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Emerging El Nino may boost energy demand


13 Jul 2023 14:16

13 Jul 2023 14:16

(Montel) An emerging El Nino weather event in the Pacific looks set to support energy demand in Asia this summer and potentially Europe this winter, Australia’s ANZ bank said on Thursday.

Australia’s Bureau of Meteorology this month reaffirmed its view that an El Nino had a 70% chance of developing this year following a spate of La Nina events that tend to deliver the opposite impacts on various parts of the globe. 

“El Nino brings warmer drier weather to Europe and Asia and both regions have already experienced above average temperatures in the initial weeks of this summer,” ANZ bank said in a note. “The impact is likely to be greater in Asia.”

A 40% decline in Chinese rainfall has curbed the country’s hydropower output by 12% this year, even as hot temperatures elevate demand for cooling.  

Stronger Chinese demand

The world’s largest coal consumer is already experiencing electricity supply curbs in some areas, while power generation records support coal and LNG imports. 

Total Chinese coal imports were up almost 90% year on year over the first five months of 2023 to a cumulative 180m tonnes.

In Europe, elevated solar output – up 21% year on year in June with a daily average of 37.8 GW – and limited gas demand eased concerns of energy shortages in the near term. 

However, a colder, drier winter could support demand for LNG imports at a time of increased competition for the fuel this winter, the bank added.  

Robin Girmes of consultancy Energy Weather expected a strong El Nino this year, but saw only a weak signal for a colder, less windy Europe this winter.

Supply risks curbed

“The chances for a super El Nino have decreased a bit, but there is little doubt we will have a robust El Nino nonetheless,” said meteorologist Todd Crawford of Atmospheric G2 in a seasonal forecast late on Wednesday. 

Although North Atlantic sea surface temperatures were elevated, El Nino was likely to dampen the impact of the northern Atlantic hurricane season, he said. 

Such storms pose a supply-side risk to oil and gas infrastructure in the US Gulf Coast. 

The nine largest El Nino years yielded an average of 12 storms compared with an average of 17.7 storms during the nine largest La Nina years, by Crawford’s calculations. Neutral years averaged 16 storms. 

The switch away from La Nina, which saturated coal mines in Australia over the past two years, has also increased the potential for Australian coal exports to rebound this year, analyst Toby Hassall of LSEG told Montel.

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