Gas Hits 2022 High as Storage Lags

European wholesale gas prices reached 97 euros per megawatt-hour on Monday, the highest level recorded since December 2022. The spike coincided with falling temperatures across the continent, which increased demand for heating. Traders adjusted their positions to reflect this immediate pressure on supply.

In the United Kingdom, the month-ahead contract rose by 4 percent to 240 pence per therm. This figure represents the highest point since the surge following Russia's full-scale invasion of Ukraine in late 2022. Market participants are also pricing in fears of further supply disruptions in the Middle East. Reports indicate that the United States and Israel have drafted plans for renewed strikes against Iran after the US midterm elections. These reports helped push oil prices to 117 dollars per barrel on Friday. Brent crude eased by approximately 2 percent on Monday but remains above 114 dollars per barrel.

Europe enters winter with gas storage levels at their lowest point in more than a decade. Current storage stands at about 75 percent, compared to a seasonal average of roughly 80 percent. A slowdown in exports from Qatar and higher summer consumption for refrigeration and cooling contributed to the deficit. British energy regulators stated that the country faces some of the highest energy costs in Europe this winter. This outcome stems from the UK's reliance on imports to maintain steady supplies, given that it holds some of the smallest gas stores in the region after decades of North Sea production.

Data from the Office for National Statistics shows the UK spent a record 4 billion pounds on power imports in the year leading to August. Half of that expenditure covered electricity imported from France. The country also made near-record payments to start up gas plants over the past year. Simultaneously, wind and solar farms were paid to switch off due to bottlenecks in the grid. British households expect a 16 percent rise in energy costs in January. This increase would bring the typical annual dual fuel bill to the equivalent of about 2,000 pounds.

Stock markets showed slight gains on Monday as the softer oil price provided some relief. The Stoxx Europe 600 index, which tracks the continent's largest companies, gained 0.3 percent in early trading. The UK's FTSE 100 rose by 0.4 percent during the same period.