A super El Niño event is expected to bring warmer winter temperatures to key Asian countries like South Korea, Japan, and parts of China. This weather pattern could reduce the region's demand for liquefied natural gas (LNG), potentially easing supply concerns and leaving more cargoes available for Europe, which is currently struggling to fill its gas storage sites to adequate levels.
As of the start of this week, Europe's gas storage sites were only 73% full, significantly lower than the average of 86% seen in previous years. Forecasts also suggest a slightly warmer winter in Europe through January 2027, which could further alleviate pressure on LNG import needs in both Asia and Europe.
Despite the favorable weather outlook, LNG supply and prices remain uncertain due to ongoing disruptions in the Middle East, particularly the closure of the Strait of Hormuz. This has severely impacted supply from Qatar, with LNG shipments through the chokepoint yet to recover due to technical constraints on shuttle-shipping and ship-to-ship transfers.
Analysts warn that prolonged supply disruptions could drive up spot Asian LNG prices and Europe's benchmark natural gas prices to new highs, as competition for available spot supply intensifies. Early this week, Europe's natural gas prices at the Dutch TTF hub surged to their highest level since early 2023, reflecting the tight supply situation.