El Niño watch
El Niño-driven drought conditions are restricting Panama Canal operations despite the seasonal rainfall period. Canal water levels are currently at their lowest compared to both 2025 and the five-year average, with rainfall deficits forcing authorities to impose draft restrictions that reduce effective vessel carrying capacity. Daily transits fell from approximately 325 per day in early May to as low as 271 in late May before partially recovering to approximately 308 per day through June, according to VesselTracker ship data. The pattern signals a tightening corridor rather than a normalizing one.
Most exposed commodities
LNG, LPG and refined products bear the most direct exposure to canal constraints. The canal links US Gulf Coast export terminals to Pacific basin demand centres, and when draft restrictions apply, carriers either load below capacity, compete for transit slots, or reroute via the Cape of Good Hope, adding approximately 10 to 15 days to voyage times. The result is higher tonne-mile demand, tighter vessel availability and elevated freight costs, even when underlying supply and demand fundamentals are unchanged. Among energy commodities, LNG is the most sensitive given narrow arbitrage margins, followed by LPG and product flows where even modest freight increases can close trading windows.
Secondary signals
Separately, US crude export loadings show signs of broader maritime friction. Exports declined to approximately 2.85 million b/d in July and August 2026, a three-year low, after peaking at approximately 4.12 million b/d in April. Floating storage rose approximately 2.9 million barrels week-on-week to roughly 5.0 million barrels for the week ending 14 August, concentrated offshore PADD 5 and PADD 3; numbers from Wood Mackenzie North American Waterborne Crude Report. The crude-to-canal link is less direct than for LNG or products, but both trends point toward a broader deterioration in maritime fluidity across key energy supply chains.
Monitoring El Niño-driven disruptions to canal operations and Gulf Coast logistics will be critical for staying ahead of further commodity flow dislocations through Q3 and Q4 2026.
For comprehensive waterborne crude import, export and intra-PADD movement data, connect with Wood Mackenzie's North American Waterborne Crude Report.
