European gas prices have reached their highest levels since 2022, following growing concerns about the continent’s supply as winter approaches and tensions in the Middle East escalate. On Monday, wholesale gas prices climbed to €97 (£81) per megawatt-hour, driven by colder temperatures and increased demand for heating.
In the UK, the month-ahead contract rose by 4% to 240p per therm, the highest price since December 2022, when prices surged after Russia’s invasion of Ukraine.
The rise in gas prices coincides with fears of further supply disruptions in the Middle East. Reports suggest that the US and Israel are preparing plans for renewed strikes against Iran after the upcoming US midterm elections, contributing to uncertainty in energy markets. These developments helped push oil prices as high as $117 a barrel on Friday, although the international Brent crude benchmark saw a slight decline of about 2% on Monday, settling at nearly $115 a barrel.
Europe faces a critical shortage of stored gas reserves, with current storage levels at their lowest in over a decade. Factors contributing to this shortage include decreased exports from Qatar and higher consumption during the summer months due to increased energy needs for cooling. As of now, European gas storage is about 75% full, falling short of the seasonal average of around 80%.
Britain’s energy regulators warn that the country will experience some of the highest energy costs in Europe this winter, partly due to its reliance on imported gas to maintain supply. The UK has some of the smallest gas stores on the continent, a result of decades of dependence on domestic production from the North Sea.
Data from the Office for National Statistics reveal that the UK spent a record £4 billion on power imports for the year ending in August, with half of that amount allocated to electricity imports from France. The country has also incurred substantial costs to activate gas plants while renewable sources like wind and solar were occasionally paid to shut down due to grid limitations.
Households in Britain are bracing for rising energy bills, with predictions indicating a 16% increase in January, potentially bringing the typical annual dual fuel bill to around £2,000.
On the stock market, European indices saw slight increases on Monday, buoyed by a decline in oil prices. The Stoxx Europe 600 index rose by 0.3%, and the UK’s FTSE 100 index was up by 0.4% in early trading.
