RINs buying interest surges as fewer refinery exemptions expected

Liquidity in Renewable Identification Numbers surged June 1 and 2 as refiners expect the US Environmental Protection Agency will grant fewer small refinery exemptions from federal biofuel blending mandates.

"Maybe not panic buying, but anything sub-65 cents/RIN will be a discount if we go back to the old amount of SREs," said one broker source, referring to the price of current-year D6 RINs.

D6 RINs make up the largest portion of refiners' biofuels obligations, whether blending physical biofuel or buying and retiring RINs, making them the best proxy for total biofuels compliance costs.

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The EPA issues RINs to track renewable fuel usage throughout the supply chain. Refiners and importers use them to show the EPA that they have fulfilled their mandated government use of renewable fuels.

Current-year D6 RINs traded up to 53 cents/RIN during the morning of June 2, their highest level since March 2018 and 3 cents higher than the S&P Global Platts assessment on June 1.

While a typical morning might see only a handful of trades, sources said that both June 1 and 2 saw a sharp uptick in buying interest, driven by refiners.

Over the past several years, the EPA has granted small refinery exemptions, which refineries with throughput of 75,000 b/d or less can apply for, at unprecedented rates. A recent court ruling, however, has led many market participants to expect fewer exemptions in the future.

That has left refiners who previously expected exemptions looking to cover higher-than-expected obligations.

In a June 1 statement, refiner HollyFrontier announced plans to convert its Cheyenne, Wyoming, refinery to renewable diesel production, citing the expected loss of the facility's small refinery exemption as a driver.