Gas prices in Europe have surged to levels not seen since 2022, after temperatures across the continent fell and traders factored in stronger heating demand into prices. The wholesale gas price reached 97 euros per megawatt-hour on Monday.
In the United Kingdom, the one-month contract rose by 4 per cent to 240 pence per therm, the highest level since December 2022. Prices spiked sharply during that period following Russia's full-scale invasion of Ukraine.
Tensions in the Middle East are also contributing to fears of further supply disruptions. Reports emerged that the United States and Israel have drawn up plans for new strikes on Iran after the US mid-term elections. These reports prompted oil prices to rise to $117 a barrel on Friday. The international benchmark Brent crude oil pulled back by around 2 per cent on Monday but remained above $114 a barrel.
Europe is facing a shortage of gas in storage ahead of winter. European storage levels are at their lowest in over a decade due to slowing exports from Qatar and increased summer consumption for running cooling and air conditioning systems. Storage is currently around 75 per cent full, while the seasonal average is closer to 80 per cent.
UK energy regulators have warned that the country will likely pay some of the highest energy costs in Europe this winter, relying on imports to ensure stable supply. The UK has some of the smallest gas storage facilities on the continent after decades of reliance on domestic production from the North Sea. According to data from the Office for National Statistics, the country paid a record £4 billion for electricity imports in the year ending in August, with half of that amount spent on electricity imported from France. Near-record payments for starting up gas power plants were also recorded during the past year, while wind and solar farms were paid to switch off due to grid congestion.
UK households are facing rising energy bills, which are predicted to rise by 16 per cent in January to reach an equivalent of around £2,000 for a typical annual bill.
European stock markets rose slightly on Monday due to lower oil prices. The Stoxx Europe 600 index was up 0.3 per cent in early trading, while the UK blue-chip FTSE 100 index rose by 0.4 per cent.
