European Gas: Prices Hit €97 as Winter Storage Drops to 75%

European wholesale gas prices climbed to €97 per megawatt-hour on Monday, marking the highest level seen since 2022. The price spike occurred as temperatures dropped across the continent, prompting traders to account for increased heating demand. This level was last recorded during the surge in prices following Russia's full-scale invasion of Ukraine in December 2022.

The rise in gas costs is compounded by concerns over supply stability in the Middle East. Reports indicate that the United States and Israel have prepared plans for renewed strikes against Iran scheduled for after the US midterm elections. These geopolitical tensions pushed oil prices to $117 a barrel on Friday. Although the international Brent crude benchmark eased by approximately 2% on Monday, it remains above $114 a barrel.

In the United Kingdom, the month-ahead gas contract rose by 4% to 240 pence per therm. This figure represents the highest point since December 2022. British energy regulators state that the country is positioned for some of the highest energy costs in Europe this winter. This outcome stems from the UK's reliance on imports to maintain steady supplies, as domestic gas stores remain among the smallest on the continent.

Continental Europe enters the winter season with gas storage at its lowest level in more than a decade. Current storage levels stand at approximately 75%, compared to a seasonal average closer to 80%. A slowdown in exports from Qatar and elevated summer consumption for refrigeration and cooling have contributed to this deficit.

The Office for National Statistics reports that the UK spent a record £4 billion on power imports in the year ending in August. Half of this expenditure covered electricity imported from France. Over the same period, the country made near-record payments to start up gas plants. Additionally, wind and solar farms were paid to switch off due to bottlenecks in the grid infrastructure.

Households in Britain expect to see higher bills as a result. Energy costs are projected to increase by 16% in January. This adjustment would bring the typical annual dual fuel bill to the equivalent of approximately £2,000. Meanwhile, stock markets showed slight gains on Monday as the softer oil price provided some relief. The Stoxx Europe 600 index, which tracks the continent's largest companies, rose by 0.3% in early trading, while the UK's FTSE 100 increased by 0.4%.