Gas Prices Hit Four-Year High as European Reserves Drop

European wholesale gas prices reached €97 per megawatt-hour on Monday, a level not seen since 2022. The surge occurred as traders priced in stronger heating demand following a drop in temperatures across the continent. The UK’s month ahead contract simultaneously rose by 4% to 240p a therm, marking its highest point since December 2022.

The price spike coincides with reports that the US and Israel have drawn up plans for renewed strikes against Iran after the US midterm elections. These geopolitical developments helped push the oil price to $117 a barrel on Friday. The international Brent crude benchmark retreated by about 2% on Monday, though it remains above $114 a barrel.

European gas storage levels stand at approximately 75%, well below the seasonal average of 80%. This drop reflects the lowest reserve levels in more than a decade. The shortfall is attributed to a slowdown in exports from Qatar and increased consumption during the summer for refrigeration and cooling needs.

British energy regulators state that the country will likely incur some of the highest energy costs in Europe this winter due to a heavy reliance on imports. The UK maintains some of the smallest gas stores on the continent after decades of dependence on North Sea production. The Office for National Statistics reported that Britain paid a record £4bn on power imports in the year ending in August. Half of that amount covered electricity imported from France.

The grid has also experienced costly inefficiencies over the past year. The UK made near-record payments to fire up gas plants while wind and solar farms were paid to turn off due to grid bottlenecks. These operational costs contribute to the financial pressure on the energy sector.

Households in Britain face rising expenses, with dual fuel bills predicted to jump 16% in January. The typical annual bill is expected to reach approximately £2,000. This increase reflects the ongoing strain on the supply chain and the higher cost of imported energy.

European stock markets showed slight gains on Monday following the drop in oil prices. The Stoxx Europe 600 index, which tracks the largest companies on the continent, rose by 0.3% in early trading. The UK’s blue chip FTSE 100 index climbed by 0.4% during the same period.