Gas costs hit 2022 highs as Europe stores run low

European gas prices hit their highest level since 2022 on Monday.

The benchmark price reached 97 euros per megawatt-hour as colder weather increased heating demand across the continent. Traders adjusted their forecasts to account for this stronger consumption. In the United Kingdom, the month-ahead contract jumped 4% to 240 pence per therm. This marked the highest point since December 2022, a period when prices surged following Russia’s invasion of Ukraine.

Market volatility also stems from concerns over supply disruptions in the Middle East. Reports indicate that the United States and Israel have prepared plans for new strikes against Iran following the US midterm elections. These reports pushed oil prices to 117 dollars per barrel on Friday. Brent crude eased by 2% on Monday but still traded above 114 dollars per barrel.

Europe is entering winter with gas storage levels at their lowest in more than a decade. Storage capacity currently sits at approximately 75% of total capacity. This is below the seasonal average of 80%. The deficit results from a slowdown in Qatari exports and high summer usage for cooling systems.

Regulators in Britain warned that the country will likely face some of the highest energy costs in Europe this winter. The UK relies heavily on imports to maintain steady supplies. Its domestic gas stores are among the smallest on the continent due to decades of dependence on North Sea production. The Office for National Statistics reported that the UK spent a record 4 billion pounds on power imports in the year leading up to August. Half of that expenditure covered electricity purchased from France. The country also made near-record payments to start up gas plants. Meanwhile, wind and solar farms were compensated to switch off due to grid bottlenecks.

Households in Britain expect higher bills as a result. Energy costs are predicted to rise by 16% in January. This increase would bring the typical annual dual fuel bill to roughly 2,000 pounds.

Stock markets showed slight gains on Monday as the softer oil price provided some relief. The Stoxx Europe 600 index rose 0.3% in early trading. The UK’s FTSE 100 index climbed 0.4%.