ANZ Bank: The increasing likelihood of El Niño this year could boost energy demand

The El Niño climate phenomenon, which brings warmer and drier weather to Europe and Asia, could support energy demand in both regions. Australian climatologists now put the chance of the phenomenon occurring at approximately 70%. Below-average rainfall could limit hydropower generation and, conversely, increase output from conventional power plants, driving up demand and, in turn, the prices of energy commodities.

Drought in Asia boosts demand for coal and LNG

The Australian Bureau of Meteorology confirmed this month its earlier forecast that there is a 70% chance of El Niño occurring this year.

“El Niño typically brings warmer and drier weather to Europe and Asia, with both regions already experiencing above-average temperatures this summer,” ANZ Bank says in its commentary on current and expected developments in the energy market. “The impact will probably be more significant in Asia.”

As the international news site Montel reports, China has recorded 40% less rainfall so far this year, resulting in a 12% drop in output from its hydropower plants. China is already facing electricity supply restrictions in some regions due to high temperatures, which are driving up demand for cooling.