Energy Markets: European Gas Hits €97 as Winter Stocks Dip

Wholesale natural gas prices in Europe reached €97 per megawatt-hour on Monday, marking the highest level since 2022. The increase reflects growing trader concerns about winter supply stability and ongoing geopolitical tensions in the Middle East.

In the United Kingdom, the month-ahead gas contract rose by 4% to 240p per therm. This figure represents the strongest price point since December 2022, a period when costs surged following Russia's full-scale invasion of Ukraine. The spike occurred as temperatures dropped across the continent, driving up demand for heating.

Market volatility in energy assets has been fueled by reports that the United States and Israel are planning new strikes against Iran. Analysts believe these operations may begin after the upcoming US midterm elections. The news pushed oil prices to $117 per barrel on Friday. By Monday, the Brent crude benchmark had fallen by 2%, but it remained above $114 per barrel.

Europe faces a physical shortage of stored gas as it enters the colder months. Current storage levels stand at approximately 75% capacity, which is the lowest in more than a decade. The seasonal average for this time of year is closer to 80%. The deficit results from a slowdown in exports from Qatar and higher consumption during the summer for refrigeration and cooling.

British energy regulators indicate that the country will likely incur some of the highest energy costs in Europe this winter. The UK relies heavily on imports to maintain steady supply because it has some of the smallest domestic gas stores on the continent. This situation follows decades of dependence on North Sea production.

Data from the Office for National Statistics shows that the UK paid a record £4 billion for power imports in the year ending in August. Half of that amount was spent on electricity imported from France. The nation also made near-record payments to operate gas plants while wind and solar farms were compensated for idling due to grid bottlenecks.

Household energy bills in Britain are expected to rise by 16% in January. This increase would bring the typical annual dual-fuel bill to approximately £2,000. European stock markets responded to the lower oil prices on Monday, with the Stoxx Europe 600 index rising by 0.3% in early trading. The UK's FTSE 100 blue-chip index gained 0.4%.