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Strong El Nino Needed to Ease Europe's LNG Demand This Winter, Rystad Energy Says

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A strong El Nino event exceeding historical trends is required to meaningfully ease Europe's liquefied natural gas requirements this winter, with the possibility viewed as a long shot by forecasters, according to a Rystad Energy analysis published Thursday.

Forecasts suggest a strong El Nino could develop in winter 2026-27, potentially the strongest since 2015.

However, European winter temperatures would need to rise by at least 2 degrees Celsius above the historical average for the continent's LNG demand to decline to or below the levels seen during the previous winter, according to the analysis.

"Given the uncertainty of weather forecasts, the statistically probable outcome is that Europe still needs meaningfully more LNG than it did last winter, even with El Nino working in its favor," Rystad analysts said.

"That matters because the stakes this winter are higher than usual. Hostilities in the Middle East have pushed LNG prices up and cut deliveries from the Persian Gulf, a key production hub. A milder winter would be a welcome offset. The question is whether El Nino can deliver one large enough to count," they said.

El Nino is a climate pattern marked by unusually warm Pacific Ocean temperatures that can disrupt weather patterns worldwide, impacting agriculture, energy demand and commodity markets.

In its base case, Rystad Energy expects European gas storage to be at 76% capacity by Nov. 1. This would require LNG imports to rise by about 15.15 million metric tons over the year through June 2027 to offset lower storage levels and reduced 2026 imports due to the war in Iran.

A 1-degree Celsius rise in winter temperatures is seen as a mildly supportive outcome for gas prices, as it will still require Europe to import at least 7 million mt more than year-ago levels.

However, a 2-degree Celsius rise in temperatures, seen only in December 2015 and February 2024, could reduce demand enough to keep Europe's LNG import needs at around the same levels as in winter 2025/26, a bearish outcome for gas markets, Rystad analysts said.

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