El Niño may ease Europe's winter gas crisis, analysis suggests

Europe faces an uncertain winter as Middle East conflict drives up liquefied natural gas (LNG) prices and cuts supplies from the Persian Gulf. High gas prices could impact European businesses and households, and potentially increase electricity costs in Europe and Norway.

However, a recent analysis from Rystad Energy suggests the El Niño weather phenomenon might offer relief with a milder winter. A forecast indicates a 100% probability of El Niño occurring in the next nine months, with an 81% chance of it being severe, potentially the strongest since 2015-2016.

European gas storage is projected to be 76% full by November 1. To compensate for lower LNG imports, Europe needs to increase its LNG imports by approximately 15.15 million tons by June 2027. The actual gas demand hinges on winter temperatures. Rystad's scenarios show that a moderate El Niño (1 degree Celsius warmer than normal) would still require Europe to import at least 7 million tons more LNG. A winter 2 degrees Celsius warmer would significantly reduce this need, bringing European LNG imports close to the 2025/2026 winter levels and easing price pressures.

Senior LNG analyst Shehar Aziz of London Stock Exchange Group agrees El Niño could be significant but points to other factors. He notes that East Asian countries are securing their needs, making them less active in the spot market and easing purchases for Europe. Aziz also observes that European gas storage levels are lower than usual for this time of year, with a slower filling rate over the summer partly due to higher demand from Asia. Despite this, he sees an increasing pace in storage replenishment as Europe's appetite for high LNG prices has waned.