UK Gas Bills Face 16% Hike as Winter Storage Hits Decade Low

European gas markets have returned to price levels last seen in 2022 as winter approaches.

Wholesale prices hit €97 per megawatt-hour on Monday. Traders cited falling temperatures and increased heating demand as the primary drivers. In the United Kingdom, the month-ahead contract climbed 4% to 240p per therm. This marks the highest point since December 2022, following the initial surge after Russia's full-scale invasion of Ukraine.

Market anxiety is compounded by Middle East tensions. Reports indicate the United States and Israel have prepared plans for renewed strikes on Iran after US midterm elections. These developments pushed oil prices to $117 a barrel on Friday. The Brent crude benchmark eased by 2% on Monday but remains above $114 a barrel.

Physical supply constraints are also tightening. European gas storage stands at approximately 75% capacity, the lowest level in over a decade. The seasonal average typically hovers near 80%. Reduced exports from Qatar and high summer consumption for cooling systems contributed to the shortfall.

British regulators state the country will face some of Europe's highest energy costs this winter. The UK relies heavily on imports due to small domestic storage reserves. Decades of reliance on North Sea production have left the nation with limited buffer capacity.

Office for National Statistics data shows the UK spent a record £4 billion on power imports in the year through August. Half of that total went to France for electricity. The country also made near-record payments to start gas plants. Conversely, wind and solar operators received payments to curtail output due to grid bottlenecks.

Households are preparing for a substantial increase in costs. Projections indicate energy prices will rise 16% in January. This will bring the typical annual dual fuel bill to the equivalent of roughly £2,000. The FTSE 100 rose 0.4% on Monday, while the Stoxx Europe 600 gained 0.3% as softer oil prices offered some relief to equities.