Gas prices in Europe hit highest level since 2022 as supply worries mount

In brief

• Gas prices in Europe reached about 97 euros per MWh, the highest since 2022.
• Disruption of LNG shipments through the Strait of Hormuz is raising concerns about winter supply.
• EU gas storage is lower than in previous years, although Poland is fully filled.
• Brussels has warned member states to prepare for a costly winter.

Prices climb to a four-year high

Gas prices in Europe have risen to 97 euros per megawatt-hour, the highest level since 2022 (Ceny gazu w Europie najwyższe od 2022 roku. Magazyny przed zimą niepokojąco puste – Puls Biznesu) (Ceny gazu w Europie najwyższe od 2022 roku. Niepokój o dostawy – Bankier.pl). Wholesale prices at the Dutch and British trading hubs jumped to their highest since late 2022 on Monday, as traders lost hope of a quick return to regular LNG shipments through the Strait of Hormuz (Wojna z Iranem uderza w Europę. Gaz najdroższy od czterech lat – Rzeczpospolita).

Supply concerns ahead of winter

The blockade of the strait, which followed the US and Israeli strikes on Iran, affects roughly 20 percent of global LNG shipments (Nadciąga ciężka i kosztowna zima? Unia Europejska już zaapelowała do krajów członkowskich – wprost.pl). Europe has felt the shortfall. The market is worried about limited supply, low stocks before winter and possible further escalation in the Middle East.

EU gas storage is entering the heating season at its lowest level for this time of year since comparable records began in 2009. Storage was 72 percent full in October. Poland is an exception, having reached 100 percent of its storage capacity.

Impact on electricity

The rise in gas prices is also pushing up electricity prices, since gas remains a key fuel for power generation. Gas still accounts for about 17 percent of the electricity produced in the EU. It also supplies a third of heat and a third of energy use in industry.

Imports and outlook

The EU has cut its gas use since the war in Ukraine began, but imports remain high. In 2023, about 90 percent of the bloc's gas came from outside the EU. Brussels has urged member states to prepare for a difficult and costly winter. European media report that prices may keep rising if cold weather increases demand. Storage levels are expected to remain the main factor to watch in the coming weeks.