NOAA has officially declared the onset of El Niño, a climate phenomenon characterized by the abnormal warming of surface waters in the equatorial Pacific Ocean. Currently active and strengthening, El Niño is expected to disrupt weather patterns around the world. Forecasts indicate that it could intensify significantly, with impacts likely peaking between October and December and persisting into early 2027.
The phenomenon start coincides with a measurable decline in US crude export activity during the week ending 10 July 2026. Waterborne tracking data show US crude departures fell to around 20 cargoes totalling approximately 16 million barrels during the week of 29 June, a 42% drop in voyage count and 55% decline in volume from the prior week's 35+ cargoes carrying approximately 36 million barrels. Same reduction pattern is observable in the US Gulf Coast, early indications for the second week of July suggest continued softness, with only 6 cargoes totalling approximately 6.1 million barrels recorded through 8 July, though this figure remains incomplete.
The Panama Canal Authority's decision to reduce the maximum authorized draft for Neopanamax vessels from 50 feet to 49.5 feet tropical fresh water, effective 3 July, adds a logistical constraint for long-haul crude shipments transiting the waterway. NOAA forecasters assign a 63% probability of "very strong" El Niño developing during the November to January period. Canal transits had averaged approximately 38 vessels per day through mid-2026, up 8% year-over-year.
Whether the observed export decline reflects weather-related loading disruptions, scheduling adjustments ahead of anticipated canal restrictions, or broader market dynamics remains unclear at this stage. The confluence of declared El Niño conditions, operational draft restrictions, and weakening weekly export volumes warrants close monitoring through the third quarter.
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