On July 3, the World Meteorological Organization confirmed that the Pacific has entered an El Niño phase, while the U.S. National Oceanic and Atmospheric Administration forecasts that it will occur in the fourth quarter of 2026. “ Very strong ” The probability of El Niño stands as high as 81%. According to a report by the World Meteorological Organization, this episode of El Niño is expected to intensify rapidly from June to August and gradually weaken toward year’s end, with a 96% likelihood of persisting through February 2027. This climatic event is exerting broad impacts across the entire energy value chain—production, transportation, and consumption—and its effects are particularly direct on the energy and chemical industries.

Summer demand surges while winter supply faces pressure.

Extreme heat has first and foremost driven a rapid surge in oil and gas consumption. In India, natural gas demand for power generation has jumped nearly 30 percent year on year, with some LNG import terminals operating at full capacity. According to data from Thailand’s national oil company, average daily natural gas consumption hit a record high in April, with more than 60 percent of it used to meet residential and commercial cooling needs. To prioritize electricity generation, Thailand has been forced to cut natural gas supplies to petrochemical producers, leading to a decline in the output of basic chemical feedstocks such as ethylene and propylene. Meanwhile, in Vietnam, the processing rates at two major refineries have been curtailed due to unstable power supply, resulting in a corresponding drop in the export volumes of refined petroleum products and petrochemicals.

Wood Mackenzie’s U.S. natural gas research director notes that a strong El Niño could bring milder-than-usual winters to the northern United States and Europe in 2026–2027. Lower heating demand would directly suppress winter natural gas consumption, and with supply relatively stable, gas prices could come under downward pressure. However, this scenario hinges on the assumption that geopolitical tensions in the Middle East do not further tighten global LNG supplies; currently, uncertainty in the Strait of Hormuz is creating a complex offsetting effect with climatic factors.

Renewable energy generation faces challenges.

The impact of El Niño on renewable energy varies by region. During 2023–2024, El Niño has already led to reduced wind power generation in the central United States, diminished solar PV output in California, and a sharp decline in hydropower production in China and India. If this episode proves as strong as forecast, solar PV generation in the southern and western U.S. could see record‑breaking drops. Research indicates that for every 1°C increase in the temperature of a photovoltaic panel’s surface, its efficiency declines by roughly 0.4% to 0.5%; sustained high temperatures can reduce a plant’s actual output by more than 10% relative to its rated capacity.

In the hydropower sector, low flows in some rivers have led to a decline in hydropower generation, forcing thermal power to step in and fill the gap. Droughts have sharply curtailed hydropower capacity across many countries, prompting them to ramp up coal-fired generation to address the shortfall. For instance, Vietnam’s coal imports doubled year on year in the first half of the year, while India’s Coal India recorded its highest-ever monthly shipment volume in June. Meanwhile, El Niño‑related heatwaves have reduced photovoltaic efficiency, prolonged periods of calm winds have depressed wind power output, and droughts have caused a steep drop in upstream river inflows. Ironically, the peak demand periods—when electricity consumption is at its highest—are precisely when hydropower, wind, and solar sources struggle to deliver their full potential. According to HSBC Research, by 2026 El Niño is expected to exacerbate both summer electricity‑demand pressures and supply‑side volatility in Asia, posing significant challenges for wind and solar energy.

The chemical industry chain is facing all-round shocks.

High temperatures exert multi‑layered impacts on the chemical industry chain. In open‑air storage tanks, rising temperatures cause pressure to increase, leading to a marked rise in evaporation losses; in some warehouses, daily loss rates are nearly two percentage points higher than during normal‑temperature seasons. As a result, certain oil and gas terminals in Malaysia have been forced to adjust loading and unloading schedules, slowing the turnover of raw materials.

In the region, spot demand for chemical feedstocks such as naphtha and methanol has not declined but instead surged, exacerbating supply‑demand imbalances and driving ethylene spot prices up by nearly 15% over the past two months, with methanol prices rising in tandem. Analysts warn that if the heatwave persists into the third quarter, some downstream polyolefin plants may be forced to reduce operating rates, leading to a corresponding drop in polyethylene and polypropylene output.

Coal‑chemical companies face pressure from two fronts: securing feedstock coal and rising electricity costs. With power plants given priority in accessing coal‑transport capacity, some coal‑chemical firms have seen a decline in the fulfillment rate of their long‑term supply contracts, forcing them to turn to the spot market to purchase higher‑priced coal. In many regions, industrial electricity tariffs have been adjusted upward in line with fuel‑cost increases, and as a high‑energy‑intensive sector, coal chemicals are experiencing a marked rise in power expenses. At a major fertilizer plant in Thailand, the comprehensive energy cost per ton of ammonia produced has increased by more than 15 percent compared with the first quarter. Meanwhile, in Bangladesh, natural gas is being allocated preferentially to power generation, causing urea plants that use natural gas as feedstock to operate at less than 60 percent capacity and prompting the country to boost urea imports.

The heatwave has also had a pronounced direct impact on refining and petrochemical facilities. High temperatures have reduced the cooling efficiency of air‑cooled exchangers and circulating water‑cooling systems, prompting refineries and chemical plants to proactively cut processing rates to ensure safe operations. In late May, a Philippine refinery lowered its daily throughput from 130,000 barrels to 100,000 barrels. Meanwhile, several catalytic cracking units under Indonesia’s state oil company operated at around 80% of their design capacity due to insufficient cooling capacity. These production cuts have tightened regional supplies of gasoline and diesel, pushing Asia’s refining margins down to near six‑month lows.

The World Meteorological Organization notes that there is currently no evidence to suggest that climate change increases the frequency or intensity of El Niño events, but global warming does amplify their associated impacts. Against the backdrop of an accelerating energy transition and a steadily rising share of renewable energy, each strong El Niño serves as a stress test. During heatwaves, competition for coal between coal-fired power generation and coal‑chemical industries, as well as for natural gas between gas‑fired power generation and the chemical sector, has come sharply to the fore, exposing the structural vulnerabilities of the energy–chemical system under extreme weather conditions.

(Source: China Chemical News, July 17, 2026)