<\/p>\n
As the global gas market grapples with the Strait of Hormuz being all-but closed for nearly three months, traders are fixated on two wildcards: China and the weather.<\/p>\n
Summer forecasts are pointing to higher-than-normal temperatures across Asia, while an El Ni\u00f1o weather pattern could make things even hotter. That will boost air-conditioning use and strain power grids when energy prices are already elevated. The key risk is the heat triggers stronger demand in China, the world\u2019s No. 1 liquefied natural gas buyer.<\/p>\n
The conflict in the Middle East has choked a fifth of global LNG supply, but that hasn\u2019t resulted in extreme price spikes seen during previous energy crises. That\u2019s mainly down to weaker Chinese imports in March and April, but signs of a rebound in the country\u2019s purchases are raising the prospect of fiercer global competition at a time when Europe will need to replenish inventories ahead of winter.<\/p>\n
\u201cThe full impact of the Strait of Hormuz closure has not yet been felt because we have been in the soft shoulder season for demand,\u201d said Saul Kavonic, an energy analyst at MST Marquee. \u201cLNG prices could rise a further 50% through August if the Strait remains largely closed.\u201d<\/p>\n<\/p>\n
LNG flows have already begun shifting toward Asia, where buyers are willing to pay higher prices, reversing a period in which Europe absorbed vast amounts of global supply to offset the loss of Russian pipeline gas.<\/p>\n
LNG deliveries to Europe are down more than 10% from a year ago, according to a 30-day moving average of ship-tracking data. And in the last two weeks, a few US shipments headed to Europe have diverted to Asia.<\/p>\n
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Meteorologists are expecting that El Ni\u00f1o \u2014 which warms sea surface temperatures in the equatorial Pacific \u2014 will emerge from June to August, and strengthen in subsequent months. That could bring hotter weather, but there\u2019s still a lot of uncertainty over how intense it will be.<\/p>\n
While El Ni\u00f1o is typically associated with raising average global temperatures, where and when that happens depends on the phase of the phenomenon and other overlapping atmospheric patterns.<\/p>\n
In the summer months, El Ni\u00f1o typically suppresses rainfall over India and much of maritime Southeast Asia, while bringing wetter conditions to central and southern China through autumn and winter. By contrast, it can raise the odds of severe drought and heat in northern China.<\/p>\n
Forecasts currently point to hotter-than-normal summer temperatures in East Asia. The average in Japan is expected to be around 1.5C (2.7F) above normal, while South Korea and much of China will see smaller anomalies of 0.5C to 1C above average, according to James Caron, director of US and Asia meteorological operations at Atmospheric G2.<\/p>\n
In South America, El Ni\u00f1o is slated to spur LNG import demand in Colombia in particular, as drier conditions there will reduce the country\u2019s hydropower generation. This would also coincide with heating demand from Argentina over the Southern Hemisphere winter.<\/p>\n
From June through August, southern and southwestern China \u2014 home to the country\u2019s biggest LNG importers \u2014 has a high chance of temperatures in the top 20% of historical records, according to outlooks from the European Centre for Medium-Range Weather Forecasts.<\/p>\n
One critical factor will be whether China has adequate hydropower output this summer, as that would reduce the need for gas. Southern and eastern China are predicted to see near-normal to wetter conditions, which would generally support hydropower output, while the north may face pockets of dryness, Caron said.<\/p>\n
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Chinese LNG imports \u2014 which slumped in the months after the war began \u2014 are recovering as utilities refill storage and replace lost Qatari supply. The 30-day moving average of deliveries to the country are down less than 10% compared with last year\u2019s levels, an improvement from minus 30% in late-March.<\/p>\n
\u201cChina\u2019s demand is likely to increase in the coming months following seasonality,\u201d said Maggie Xueting Lin, an energy research strategist at Citigroup Inc. But \u201cindustrial demand remains quite weak due to a sluggish real estate sector\u201d and, for now, the \u201cChinese government has kept the tariffs on US LNG imports,\u201d she said.<\/p>\n
Japan, the world\u2019s second-largest LNG buyer, is facing a blistering summer, according to local forecasts, which could force it to buy more shipments of the power-plant fuel. The nation\u2019s spot electricity prices have jumped over the last few months, and are near the highest level since 2022. Some traders say that Japanese buying, which has increased in previous El Ni\u00f1o years, could move the needle even more than China.<\/p>\n
Europe, meanwhile, is poorly positioned from an energy perspective as temperatures warm: Swiss hydro is low and river levels are declining, which could affect nuclear power plants. While Asia has recently been outbidding Europe in LNG markets, that could quickly change and result in sharp price increases.<\/p>\n
\u201cIt\u2019s a tight gas market in Europe,\u201d said Helle Ostergaard Kristiansen, senior vice president for gas and power at Equinor ASA. \u201cThere\u2019s simply a lack of physical gas and it is challenging to fill up the gas storage to an acceptable level for next winter. And for every day this conflict continues, it becomes more and more critical.\u201d<\/p>\n
\u00a9 2026 Bloomberg<\/p>\n
#searing #Asian #summer #add #risk #surging #gas #prices<\/p>\n","protected":false},"excerpt":{"rendered":"
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