On July 31, global energy markets faced a key data release day. The U.S. Energy Information Administration (EIA) weekly natural gas inventory report showed that for the week ending July 25, U.S. natural gas inventories increased by 78 billion cubic feet, well above the market expectation of 64 billion cubic feet and above the five-year average increase. This surprise overshoot caused the NYMEX natural gas futures front-month contract to fall more than 3% intraday, settling at $2.84 per million British thermal units (MMBtu), the largest one-day drop in nearly a month.
Why is inventory data so important?
Natural gas inventories are a core indicator of supply-demand balance. Summer is normally the injection season, and an above-normal build often signals weak demand or high output. Industry analysts noted that recent hot weather in the U.S. raised air-conditioning demand, but maintenance at liquefied natural gas (LNG) export facilities on the Gulf Coast curbed outbound demand, while shale gas output stayed high, together boosting the inventory build.
- According to EIA data, total U.S. natural gas inventories stood at 3.124 trillion cubic feet for the week ending July 25, about 8.6% higher than a year earlier.
- Inventory levels were about 4.2% above the five-year average, indicating relatively ample supply.
The data also carries signals for Asian markets. As one of the world’s largest LNG buyers, Northeast Asia’s spot delivered price fell to $11.2/MMBtu today, tracking U.S. weakness. PTT’s natural gas procurement unit is in annual long-term LNG contract negotiations; lower spot prices should help reduce its import costs and may eventually feed into domestic industrial and power-generation gas prices.
Green power prices stand out as carbon price synergy emerges
In sharp contrast to natural gas, green power quotes were broadly stable today, and some regions even edged up. The green power trading platform of the Industrial Estate Authority of Thailand data center showed the volume-weighted average transaction price for renewable power at THB 3.42/kWh on July 31, flat from yesterday but about 12% higher than conventional thermal power.
The key factor underpinning green power prices is the continued rise in carbon emission allowance prices. EU Allowance (EUA) futures broke above EUR 98/tonne today, rising for a third consecutive day; Thailand’s domestic carbon market pilot allowance price also hit a record high of THB 75/tonne. Energy consultancies say higher carbon prices directly widen the cost gap between high-carbon and low-carbon power sources, significantly strengthening corporate demand for green power.
- Participants in Thailand’s green power trading market have expanded from the original 12 companies to 47, including the renewable energy subsidiary of PTT Group.
- For multilateral power purchase agreements (PPAs), solar project quotes remained stable at THB 3.1-3.4/kWh, while wind project quotes were slightly higher at THB 3.6-3.8/kWh.
“The signal from carbon prices is encouraging more companies to buy green power,” said an expert from Thailand’s Energy Regulatory Commission. “Even though natural gas prices are low, considering future carbon costs, green power’s cost-effectiveness is becoming increasingly apparent.”
Crude oil: Weakness persists but downside limited
In crude, WTI and Brent futures moved marginally today, staying within the recent range. The WTI September contract traded at $67.8/barrel, down 0.4%; the Brent October contract was at $70.2/barrel, down 0.3%. Concerns over slowing global demand remain the main pressure, but geopolitical uncertainty in the Middle East provides a floor for oil prices.
Thailand’s domestic diesel retail price held steady today; PTT announced a new retail guide price of THB 32.55/liter. Analysts expect crude to remain range-bound until the next OPEC+ market monitoring meeting.
How should investors respond?
Based on today’s market performance, energy investment institutions suggest focusing on the following:
- Natural gas still faces inventory pressure in the near term; watch for the timing of LNG export facility normalization.
- Green power benefits from the long-term upward trend in carbon prices; earnings expectations for related operators could improve, and valuation recovery opportunities in PTT Group’s renewable energy segment are worth attention.
- Carbon allowance price volatility is increasing; companies holding carbon assets should consider hedging strategies.
Overall, this week’s energy market is dominated by natural gas inventory data and carbon price trends, while the price linkage between oil/gas and green power is undergoing profound changes. Against the backdrop of energy transition, investors should grasp both traditional energy supply-demand dynamics and green energy policy dividends to build more diversified portfolio strategies.
