European Gas Prices Surge to Four-Year High on Winter Supply Fears

European natural gas prices have soared to their highest level since December 2022, driven by fears of supply disruptions from the Middle East and critically low storage levels ahead of winter. The Dutch TTF contract, Europe's benchmark gas price, briefly touched €97.64 per megawatt-hour on Monday, a rise of about 234% since the start of the year Source: Euronews. The UK's month-ahead contract also rose to 240p a therm, its highest since the 2022 energy crisis Source: theguardian.

Supply and Storage Crisis

The price surge is fueled by a combination of factors. The conflict with Iran and the closure of the Strait of Hormuz have cut off Europe from Qatari liquefied natural gas (LNG), which made up roughly 8% of the EU's LNG imports last year. Since May, none has arrived Source: Euronews. This has prevented Europe from rebuilding its reserves over the summer. EU storage was 74.6% full on 24 October, compared to 82.9% a year earlier and 98.5% in 2023 Source: Euronews. The Institute for Energy Economics and Financial Analysis (IEEFA) says it is the lowest for this time of year since records began in 2011 Source: Euronews. The Guardian reports that European storage is now about 75% full, against a seasonal average closer to 80% Source: theguardian.

Impact on Households

British households face a significant increase in energy costs. Energy bills are predicted to rise 16% in January, reaching the equivalent of about £2,000 for the typical annual dual fuel bill Source: theguardian. The UK has some of the smallest gas stores in Europe and paid a record £4bn on power imports over the year ending in August Source: theguardian. Analysts warn that Europe may have to cut its gas consumption to get through the winter, with demand reduction remaining the biggest lever within Europe's control Source: Euronews.