European Gas Hits 2022 Highs Amid Winter Storage Drop

European wholesale gas prices reached their highest levels since 2022 on Monday, hitting 97 euros per megawatt-hour. The spike follows a drop in temperatures across the continent, which increased demand for heating. Traders also factored in ongoing supply concerns from the Middle East conflict.

In the United Kingdom, the month-ahead gas contract rose by 4 percent to 240 pence per therm. This marks the highest price point since December 2022, a period of market turmoil following Russia's full-scale invasion of Ukraine.

Markets are reacting to reports that the United States and Israel have drawn up plans for renewed strikes against Iran. Analysts suggest these strikes are planned for after the US midterm elections. These reports drove oil prices to 117 dollars a barrel on Friday. Although the international Brent crude benchmark eased by 2 percent on Monday, it remains above 114 dollars a barrel.

Europe is entering the winter season with gas storage at its lowest level in more than a decade. Current storage sits at approximately 75 percent full, down from a seasonal average closer to 80 percent. A slowdown in exports from Qatar and higher summer consumption for refrigeration contributed to the drop in reserves.

Britain's energy regulators expect the country to face some of the highest energy costs in Europe this winter. The UK relies heavily on imports to maintain steady supplies, a vulnerability stemming from decades of dependence on North Sea production. The country currently holds some of the smallest gas stores in Europe.

Data from the Office for National Statistics shows the UK spent a record 4 billion pounds on power imports in the year ending in August. Half of that expenditure went toward electricity imported from France. Over the same period, the nation made near-record payments to start up gas plants while paying wind and solar farms to switch off due to grid bottlenecks.

Households in Britain are preparing for higher bills, with energy costs predicted to rise by 16 percent in January. This increase will bring the typical annual dual fuel bill to approximately 2,000 pounds. Stock markets showed some relief on Monday, with the Stoxx Europe 600 gaining 0.3 percent and the UK's FTSE 100 rising by 0.4 percent.