Gas hits four year peak at 97 euros

Wholesale gas prices in Europe reached 97 euros per megawatt hour on Monday, a level not seen since 2022. The jump follows a drop in temperatures across the continent and growing concerns about winter supply.

The primary driver of the price spike is a shortage of stored gas reserves. European storage levels currently sit at approximately 75% of capacity, which is the lowest point in more than ten years. This deficit results from a slowdown in exports from Qatar and higher summer consumption for cooling and refrigeration. The seasonal average for this time of year is closer to 80%.

Supply fears have intensified due to reports that the United States and Israel are preparing for renewed strikes on Iran after the US midterm elections. This geopolitical tension pushed oil prices to 117 dollars a barrel on Friday. Although the Brent crude benchmark fell by about 2% on Monday, it remains above 114 dollars a barrel.

In the United Kingdom, the month ahead gas contract rose by 4% to 240 pence per therm. This marks the highest level since December 2022, shortly after Russia’s full scale invasion of Ukraine. British energy regulators state that the UK will likely face some of the highest energy costs in Europe this winter. The country relies heavily on imports because it has some of the smallest domestic gas stores in the region, a situation shaped by decades of reliance on North Sea production.

Financial data from the Office for National Statistics shows the UK paid a record 4 billion pounds on power imports for the year ending in August. Half of that amount covered electricity imported from France. The grid has also seen near record payments to fire up gas plants while wind and solar farms were paid to shut down due to bottlenecks.

For British households, the rising wholesale costs translate into higher bills. Predictions indicate that the typical annual dual fuel bill will increase by 16% in January. The new figure will be equivalent to about 2,000 pounds. In early trading on Monday, European stock markets posted slight gains as oil prices eased. The Stoxx Europe 600 index rose by 0.3%, and the UK’s FTSE 100 index climbed by 0.4%.