European wholesale gas prices have ascended to levels unseen since 2022, driven by growing anxiety over winter supply security and ongoing instability in the Middle East. On Monday, wholesale gas reached €97 (£81) per megawatt-hour as falling temperatures across the continent prompted traders to price in heightened demand for heating.
The United Kingdom’s month-ahead contract saw a 4% increase, climbing to 240p per therm. This marks the highest point for the contract since December 2022, a period characterized by price spikes following Russia’s full-scale invasion of Ukraine. Market sentiment has been further agitated by reports suggesting the US and Israel have formulated plans for renewed strikes against Iran following the US midterm elections. These developments contributed to oil prices reaching $117 a barrel last Friday; while the international Brent crude benchmark retreated about 2% on Monday, it remains above $114 (£85) per barrel.
Europe enters the winter season with lower stored gas reserves than in over a decade, a situation exacerbated by a decline in exports from Qatar and increased summer consumption required for refrigeration and cooling. Current European storage levels sit at approximately 75%, falling short of the seasonal average of 80%.
British energy regulators have cautioned that the UK faces some of Europe's highest energy costs this winter, largely due to a dependence on imports. Having relied for decades on North Sea production, the UK now maintains some of the continent's smallest gas reserves. Data from the Office for National Statistics indicates the UK spent a record £4bn on power imports in the year ending in August, with half of that figure attributed to electricity sourced from France. Furthermore, the UK has faced near-record costs to activate gas plants as wind and solar farms were paid to power down due to grid bottlenecks.
For British households, the economic strain is intensifying, with energy bills projected to rise by 16% in January, reaching the equivalent of roughly £2,000 for a typical annual bill. Despite these pressures, European stock markets saw modest gains on Monday, with the Stoxx Europe 600 index rising 0.3% and the UK’s FTSE 100 climbing 0.4%, supported by the slight retreat in oil prices.
