European gas hits €97 as storage falls to 75 percent

European wholesale gas prices reached €97 per megawatt-hour on Monday, matching levels last seen in 2022. The spike follows a drop in temperatures across the continent, which increased demand for heating. Traders incorporated this stronger consumption into their pricing models, pushing costs higher just as the region enters winter.

The rise in gas costs is not isolated to the European continent. In the United Kingdom, the month-ahead gas contract climbed 4% to 240p per therm. This figure marks the highest price recorded since December 2022, a period when prices surged following Russia's full-scale invasion of Ukraine. The current surge reflects a combination of physical supply constraints and market anxiety over geopolitical risks.

Markets are reacting to reports that the United States and Israel have drawn up plans for renewed strikes against Iran. These strikes are reportedly scheduled to occur after the US midterm elections. Such fears pushed the price of oil to $117 per barrel on Friday. Although the international Brent crude benchmark eased by approximately 2% on Monday, it remains above $114 per barrel.

Physical reserves in Europe are at their lowest level in more than a decade. Storage facilities are currently about 75% full, compared to a seasonal average closer to 80%. Officials and analysts attribute this shortfall to a slowdown in exports from Qatar and higher summer consumption. Increased usage during the summer months was driven by the need to power refrigeration and cooling systems.

Britain’s energy regulators state that the country will face some of the highest energy costs in Europe this winter. The UK relies heavily on imports to maintain steady supplies, a vulnerability exacerbated by decades of dependence on homegrown North Sea production. This dependency means the UK holds some of the smallest gas stores in the region.

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

Household bills are expected to reflect these market pressures. Energy costs are predicted to rise 16% in January, bringing the typical annual dual fuel bill to the equivalent of about £2,000. Stock markets showed slight gains on Monday, with the Stoxx Europe 600 rising 0.3% and the FTSE 100 gaining 0.4%, as softer oil prices offered limited relief.