Gas Hits 97 Euros as Winter Storage Falls to 75%

European gas prices hit a four-year high on Monday.

Wholesale gas reached 97 euros per megawatt-hour, a level not seen since 2022. The United Kingdom's month-ahead contract rose by 4% to 240 pence per therm. This matches the price peak from December 2022, which followed Russia's full-scale invasion of Ukraine.

Traders are pricing in stronger demand for heating as temperatures drop across the continent. Fears of supply disruptions in the Middle East are adding pressure to the market. Reports indicate the United States and Israel have drawn up plans for renewed strikes against Iran after the US midterm elections. These reports pushed the oil price as high as $117 a barrel on Friday. The international Brent crude benchmark fell by about 2% on Monday but remains over $114 a barrel.

Europe enters winter with gas reserves at their lowest level in more than a decade. Storage stands at about 75% full, compared to a seasonal average closer to 80%. A slowdown in exports from Qatar and increased summer consumption for refrigeration and cooling contributed to the drop in reserves. The United Kingdom faces similar constraints. Regulators note the country is expected to pay some of the highest energy costs in Europe this winter due to its reliance on imports. Britain has some of the smallest gas stores in Europe after decades of relying on North Sea production.

The UK paid a record £4 billion on power imports over the year ending in August. Half of that amount went to electricity imported from France, according to the Office for National Statistics. The country also made near-record payments to fire up gas plants while paying wind and solar farms to turn off due to grid bottlenecks.

British households face rising bills. Predictions show the typical annual dual fuel bill will rise 16% in January to about £2,000. European stock markets reacted to the weaker oil price on Monday. The Stoxx Europe 600 index rose by 0.3% in early trading. The UK's FTSE 100 blue chip index climbed by 0.4%.