Gas Hits €97 as Winter Reserves Lag

European wholesale gas prices reached €97 per megawatt-hour on Monday, the highest level since 2022.

Traders cited falling temperatures across the continent and rising demand for heating as key drivers of the increase. The price spike reflects growing anxiety over winter supply chains and geopolitical tensions in the Middle East.

In the United Kingdom, the month-ahead gas contract rose 4% to 240p per therm. This marks the highest point for the contract since December 2022, a period defined by price surges following Russia's invasion of Ukraine. The UK market is reacting to reports that the United States and Israel have planned renewed strikes against Iran after the US midterm elections. Those reports helped push oil prices to $117 per barrel on Friday. The Brent crude benchmark eased by about 2% on Monday but remained above $114 per barrel.

Europe is entering the winter season with gas storage at its lowest level in over a decade. Export slowdowns from Qatar and elevated summer consumption for cooling systems contributed to the drop. Storage facilities are currently 75% full, well below the seasonal average of 80%.

Regulators in Britain warned that the country may face some of the highest energy costs in Europe this winter. The UK relies heavily on imports to maintain supply stability, a vulnerability stemming from decades of dependence on North Sea production. Its domestic gas stores are among the smallest in the region.

The Office for National Statistics reported that the UK spent a record £4bn on power imports in the year leading up to August. Half of that expenditure covered electricity imported from France. The country also made near-record payments to start gas plants over the past year. Wind and solar farms were paid to switch off due to grid bottlenecks.

British households expect higher bills as a result. Energy costs are projected to rise 16% in January. This increase would bring the typical annual dual fuel bill to approximately £2,000. Stock markets showed some relief on Monday as oil prices softened. The Stoxx Europe 600 index gained 0.3% in early trading, while the UK's FTSE 100 rose by 0.4%.