Heating costs rise as winter gas storage hits decade low

European gas prices spiked to a four-year high on Monday as households across the continent prepared for colder weather. Wholesale trading hit €97 a megawatt-hour, a level not recorded since 2022. This surge reflects growing anxiety over winter supply reliability and ongoing tensions in the Middle East.

In the United Kingdom, the month-ahead gas contract climbed 4% to 240p per therm. This figure marks the highest price since December 2022, when costs surged following Russia’s invasion of Ukraine. The price increase coincides with falling temperatures that are driving up demand for heating.

Traders are pricing in further disruptions from the region. Reports indicate that the US and Israel have developed plans for new strikes against Iran after the American midterm elections. These developments pushed oil prices to $117 a barrel on Friday. Although Brent crude fell by 2% on Monday, it remains above $114 a barrel.

Europe enters this winter with gas reserves at their lowest level in over ten years. Storage facilities are currently 75% full, which is below the seasonal average of 80%. This deficit stems from a slowdown in exports from Qatar and higher consumption during the summer months to power refrigeration and cooling systems.

UK energy regulators state that Britain faces some of the highest energy costs in Europe this season. The country relies heavily on imports to maintain a steady supply, as domestic North Sea production has declined. Britain possesses some of the smallest gas storage networks in the region.

Recent data from the Office for National Statistics shows the UK paid a record £4 billion for power imports in the year ending in August. Half of that amount went toward electricity purchased from France. The grid has also required near-record payments to run gas plants while wind and solar farms were paid to stop generating power due to network bottlenecks.

British households are set to see a 16% increase in energy bills in January. The typical annual dual fuel bill is projected to reach the equivalent of £2,000. European stock markets reacted mildly to the energy news, with the Stoxx Europe 600 index up 0.3% and the FTSE 100 rising 0.4% in early Monday trading.