European Gas Costs Hit €97 as Winter Reserves Hit Decade Low

European wholesale gas prices reached €97 per megawatt-hour on Monday, matching levels last recorded in 2022. The spike follows a drop in temperatures across the continent, which increased demand for heating. Traders are also pricing in fears related to the ongoing conflict in the Middle East.

In the United Kingdom, the month-ahead gas contract rose 4% to 240p per therm. This marks the highest price since December 2022, a period when costs surged following Russia's full-scale invasion of Ukraine. The market reaction reflects growing anxiety over potential supply disruptions.

Reports indicate that the United States and Israel have prepared plans for renewed strikes against Iran after the US midterm elections. These developments pushed oil prices to $117 a barrel on Friday. Although the international Brent crude benchmark fell about 2% on Monday, it remains above $114 a barrel.

Europe is entering the winter season with gas storage levels at their lowest point in more than a decade. Storage stands at approximately 75% capacity, well below the seasonal average of 80%. A slowdown in exports from Qatar and higher summer consumption for refrigeration contributed to the decline.

British energy regulators state that the UK is expected to face some of the highest energy costs in Europe this winter. The country relies heavily on imports to maintain supply stability. This dependence stems from decades of reliance on North Sea production, leaving Britain with some of the smallest gas reserves in the region.

Data from the Office for National Statistics shows the UK spent a record £4 billion on power imports in the year ending in August. Half of that expenditure went to electricity imported from France. The country also made near-record payments to start up gas plants while compensating wind and solar farms for switching off due to grid bottlenecks.

British households are preparing for higher energy bills. Costs are predicted to increase by 16% in January. This rise would bring the typical annual dual fuel bill to approximately £2,000. Stock markets showed slight gains on Monday, with the Stoxx Europe 600 up 0.3% and the FTSE 100 up 0.4% in early trading.