Heating bills to spike as European gas storage hits decade low

European wholesale gas prices reached 97 euros per megawatt-hour on Monday, marking the highest level since 2022. The surge reflects rising demand for heating as temperatures dropped across the continent. Traders also priced in potential supply disruptions linked to the ongoing conflict in the Middle East.

Reports that the United States and Israel have prepared plans for renewed strikes against Iran after US midterm elections contributed to the market volatility. Those reports pushed oil prices to 117 dollars a barrel on Friday. The international Brent crude benchmark retreated by approximately 2 percent on Monday but stayed above 114 dollars a barrel.

European gas storage levels stand at roughly 75 percent capacity, the lowest figure in over a decade. The seasonal average for this time of year is closer to 80 percent. A slowdown in exports from Qatar and increased summer consumption for refrigeration and cooling have depleted reserves ahead of the winter season.

In the UK, the month-ahead gas contract rose by 4 percent to 240 pence per therm. This is the highest level recorded since December 2022, when prices spiked following Russia's full-scale invasion of Ukraine. British energy regulators expect the country to pay among the highest energy costs in Europe this winter due to its reliance on imported fuel.

The UK holds some of the smallest gas storage facilities in Europe, a result of decades of dependence on North Sea production. According to the Office for National Statistics, the country spent a record 4 billion pounds on power imports over the year ending in August. Half of that expenditure covered electricity imported from France.

British households face a projected 16 percent increase in energy bills starting in January. The typical annual dual fuel bill is expected to reach approximately 2,000 pounds. The UK also made near-record payments in the past year to run gas plants while wind and solar farms were paid to shut down due to grid bottlenecks.