U.S. Renewable Fuel Credits Surge to Multi-Month Highs Amid Surprising Demand Boost
By Shariq Khan
Renewable fuel credits in the U.S. market soared to multi-month highs on Friday, catching traders off guard with increased demand from refiners striving to meet mandates and soaring soyoil prices. The unexpected surge in prices for Renewable Identification Numbers (RINs) comes as a welcome relief for biofuel producers, but poses challenges for petroleum refiners grappling with plummeting profit margins amid oversupply and weak demand.
Both D4 RINs, allotted to biomass-based diesel producers, and D6 RINs, designated for ethanol suppliers, skyrocketed to 79 cents each on Friday, marking the highest levels since January, as per LSEG data.
The U.S. government enforces the blending of low-carbon fuels in the nation’s transportation fuel mix and issues RINs to companies complying with the regulations. Refiners failing to meet targets can purchase RINs from others or face penalties.
While speculation arose post Trump’s reelection that small refineries might secure exemptions to their RIN generation targets under his administration, no concrete plans have been outlined yet. The uncertainty surrounding potential reintroduction of widespread small refinery exemptions has prompted some small refiners to buy RINs now to avoid potential shortages, according to industry experts.
Market participants anticipate a dwindling supply of RINs next year, partly due to stricter government mandates and reduced renewables blending amid weakened fuel demand. Simultaneously, soybean oil prices witnessed a rally this week on expectations of potential tariffs on biofuel feedstock imports by Trump.
The surge in feedstock prices has squeezed producer margins, leading them to price their RINs higher, explained Paul Niznik, director of energy at Capstone consultancy.
Overall, the unexpected surge in U.S. renewable fuel credits highlights the complex interplay between regulatory dynamics, market forces, and political uncertainties that can significantly impact the energy sector and stakeholders involved.