RINs volatile in wake of Valero lawsuit

New York — Renewable Identification Numbers (RINs) saw consecutive days of volatility Jan. 6 in the wake of Valero Marketing and Supply filing a lawsuit alleging a Sundive Commodity Group failed to deliver 106 million RINs.

"I have to think Valero-Sundive is the main captain of this ship," said one source about the driver behind the rally. "106 million RINs to one [counterparty] is *checks notes*...a mucho lot. Who knows if there are others long nothing, too."

Although RINs had already been on the rise amid an ongoing rally in soybean oil, 2020 D6 RINs rose to a Jan. 6 assessment of 90.25 cents/RIN after intraday trading as high as 96.50 cents/RIN, up from 80.25 cents/RIN Jan 4.

Jan. 6 marked the highest price for current-year D6 RINs since late 2017, pushing the per-gallon price of biofuels blending compliance, the RVO, to 11.27 cents/gal, also its highest level since 2017.

According to the Dec. 31 filing, Valero bought RINs from Sundive between April and October 2020 that were to be transferred to Valero between September and December 2020.

Valero claimed that Sundive did not deliver the RINs, forcing Valero to buy RINs at the prevailing market price that was much higher than the earlier trades.

Although the market reacted strongly in the wake of the lawsuit, the allegations were limited to only the two counterparties and did not signal any broad fundamentals.

Most of the support for RIN prices in recent days has come from soybean oil futures reaching their highest levels since 2013, providing support to D4 RINs that bolstered other RIN categories.

A Sundive representative could not be reached for comment.

The US Environmental Protection Agency issues a RIN to track renewable fuel usage throughout the supply chain under the Renewable Fuel Standard. Refiners and importers — called "obligated parties" — use them to show the EPA that they have fulfilled their mandated government use of renewable fuels. If the obligated party has not used enough physical product, it can buy RINs to satisfy the quota.