Record-breaking El Niño reshapes energy outlooks

A strong El Niño event is affecting electricity generation and fuel consumption. Drought in India is curbing hydropower and boosting coal-fired generation, while a warmer winter could dampen demand for liquefied natural gas (LNG) in parts of Asia.

On 10 November, the Japan Meteorological Agency (JMA) said El Niño would peak in the first half of winter and was likely to persist into spring 2027. The sea surface temperature anomaly in the monitored area reached +4.4 °C in October, surpassing the September record in measurements dating back to 1949. El Niño increases the likelihood of a warmer winter in Japan and parts of Asia, but does not guarantee the same weather everywhere.

“When El Niño arrives, there is a higher likelihood of a warm winter, and we may see lower LNG consumption,” a source at a Japanese energy company said.

However, colder weather in eastern Japan boosted electricity demand, and the price on the JEPX exchange rose to USD 215.7/MWh on 9 November, its highest level since December 2022. LNG inventories held by Japanese energy companies fell 10.7% week on week to 1.92 million tonnes as of 1 November, their lowest level since 7 June.