Gas hits €97 as Europe faces decade-low winter storage

Wholesale gas prices in Europe climbed to €97 per megawatt-hour on Monday, the highest level recorded since 2022. The surge coincided with falling temperatures across the continent, which prompted traders to price in higher demand for heating. The price point represents a sharp increase from previous months and marks a new high for the current winter cycle.

In the United Kingdom, the month-ahead gas contract rose by 4% to 240 pence per therm. This level matches the peak seen in December 2022, when prices spiked following Russia’s full-scale invasion of Ukraine. The rise in domestic costs reflects the broader continental trend and the specific vulnerability of the British grid.

Market analysts point to ongoing tensions in the Middle East as a primary driver of the price jump. Reports indicate that the United States and Israel have prepared plans for renewed strikes on Iran, intended to occur after the US midterm elections. These geopolitical developments pushed oil prices to $117 a barrel on Friday. Although Brent crude retreated by 2% on Monday, it remains above $114 a barrel.

Europe enters the winter season with gas storage reserves at their lowest point in over ten years. Current storage levels stand at approximately 75% capacity, compared to a seasonal average of 80%. This shortfall stems from a slowdown in exports from Qatar and increased consumption during the summer months to power refrigeration and cooling systems.

British energy regulators expect the country to face some of the highest energy costs in Europe this winter. The UK relies heavily on imports to maintain a steady supply, a situation exacerbated by its small domestic gas stores, which are among the smallest in the region after decades of North Sea production. According to the Office for National Statistics, the UK paid a record £4 billion for power imports in the year ending in August. Half of that total was spent on electricity imported from France.

The grid has also required near-record payments to gas plants over the past year to manage supply. These costs arose while wind and solar farms were paid to reduce output due to bottlenecks in the transmission network. British households now face a projected 16% rise in energy bills in January. The typical annual dual-fuel bill is expected to reach the equivalent of about £2,000.

European stock markets reacted with modest gains on Monday, buoyed by the slight decline in oil prices. The Stoxx Europe 600 index, which tracks major companies on the continent, rose by 0.3% in early trading. The UK’s FTSE 100 index climbed by 0.4% during the same period.