European Gas Prices Reach €97 as Winter Storage Hits Decade Low

European wholesale gas prices hit €97 per megawatt-hour on Monday, a level last recorded in 2022. The spike occurred as temperatures dropped across the continent and traders accounted for increased heating demand. In the United Kingdom, the month-ahead contract rose 4% to 240p per therm. That figure marks the highest point since December 2022, when prices surged following Russia's full-scale invasion of Ukraine.

Markets are reacting to concerns about supply disruptions in the Middle East. Reports indicate that the US and Israel have prepared plans for renewed strikes against Iran after the US midterm elections. Those reports pushed oil prices to $117 a barrel on Friday. The international Brent crude benchmark eased by about 2% on Monday but remained above $114 a barrel.

Europe is entering winter with gas storage at its lowest level in over a decade. Storage is currently about 75% full, compared with a seasonal average closer to 80%. A slowdown in exports from Qatar and higher summer consumption for refrigeration and cooling both contributed to the decline.

British energy regulators stated that the country is expected to face some of the highest energy costs in Europe this winter. The UK relies heavily on imports to maintain steady supplies. It has some of the smallest gas stores in the region after decades of depending on homegrown production from the North Sea.

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

British households are preparing for higher bills. Energy costs are predicted to rise 16% in January. That increase will bring the typical annual dual fuel bill to the equivalent of about £2,000. Stock markets edged up on Monday as the softer oil price offered some relief. The Stoxx Europe 600 gained 0.3% in early trading, while the UK's FTSE 100 rose by 0.4%.