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The likely development of a La Niña system could have sizeable impacts on short-term demand and supply patterns across a range of commodities. Strategists at ANZ Bank expect the major impact of La Niña to be on winter space heating and electricity demand, with harsher than average weather conditions likely to lead to a spike in energy demand, and potentially a corresponding rise in energy prices.

Key quotes

“The La Niña weather pattern is likely to benefit a stronger demand for energy commodities. The colder than average temperatures that normally occur in China are likely to see additional energy consumption. This is likely to benefit thermal coal consumption in the north of the country. We also see LNG benefiting from this weather cycle.” 

“We see risks of supply disruptions rising for key commodities, such as coking coal and iron ore. The last major La Niña event resulted in two-thirds of the global seaborne coking coal market being shut down. Increased iron ore disruptions from hurricanes could also be on the cards.”

“Increased disruptions from hurricanes in the Atlantic can also disrupt the oil industry. Gulf of Mexico offshore oil production accounts for 17% of total US crude oil production. However, this can be mitigated by lower demand from refiners that are also shut.”