Europe Gas Prices Spike as Winter Storage Hits 10 Year Low

European wholesale gas prices reached 97 euros per megawatt-hour on Monday. This marks the highest level recorded since 2022. Traders are pricing in colder temperatures and a corresponding spike in heating demand across the continent.

In the United Kingdom, the month-ahead gas contract climbed 4% to 240 pence per therm. This represents the strongest price point since December 2022. That prior peak followed the Russian invasion of Ukraine. Oil markets also reacted to geopolitical tensions. Reports indicated that the United States and Israel planned renewed strikes on Iran after upcoming midterms. Brent crude briefly touched 117 dollars a barrel on Friday before settling near 114 dollars on Monday.

Storage levels in Europe stand at roughly 75% of capacity. This is the lowest figure for this time of year in more than a decade. Seasonal averages typically hover near 80%. A slowdown in exports from Qatar and increased summer usage for cooling systems contributed to the drop in reserves.

British regulators expect the UK to face some of the highest energy costs in Europe this winter. The nation relies heavily on imports due to small domestic storage facilities. Decades of North Sea production left Britain with minimal buffer capacity compared to continental neighbors.

Data from the Office for National Statistics shows the UK spent a record 4 billion pounds on power imports in the year ending August. Half of that sum covered electricity from France. The country also made near-record payments to start gas plants while compensating wind and solar operators to shut down due to grid bottlenecks.

Households in Britain face a 16% increase in energy costs starting in January. The typical annual dual fuel bill will reach approximately 2,000 pounds. Stock markets showed slight gains on Monday as softer oil prices provided some relief. The Stoxx Europe 600 rose 0.3% and the FTSE 100 gained 0.4% in early trading.