NYMEX products retreat as US mulls RINs relief for refiners

NYMEX refined product futures settled sharply lower June 11 following reports that President Joe Biden's administration is weighing options to provide relief to US refiners from biofuel blending mandates.

NYMEX July RBOB settled 2.61 cents lower at $2.1861/gal, and July ULSD declined 2.27 cents at $2.1207/gal.

Refined product futures came under pressure ahead of US trading hours following media reports that the White House may take unspecified actions to ease costs faced by refiners to meet renewable fuel standards.

Current-year US Renewable Identification Numbers traded at an all-time high of $2.00/RIN during morning trading June 10, but prices moved sharply lower following media reports about the White House action on renewable fuel standards.

S&P Global Platts assessing current-year D6 RINs at $1.7525/RIN on June 11, down 21.75 cents on the day, pushing the Platts Renewable Volume Obligation down to 20.9372 cents/gal, 2.3979 cents lower on the day and a one-month low.

Weakness in futures prices was a reflection of this sharp downturn in RINs, analysts said.

"The possibility of relief on mandates will certainly move RIN values lower. The market is trading in anticipation by selling RBOB and ULSD cracks, which have RINs values embedded," S&P Global Platts Analytics analyst Sergio Barron said. "We expect RIN-less cracks to remain largely unaffected and maintain parity with international cracks."

The ICE New York Harbor RBOB crack versus Brent fell to $19.17/b in afternoon trading, down from $20.36/b on June 10 and on pace for the lowest close since April 27. The ICE ULSD crack versus Brent retreated to $16.41/b, in from $17.61/b the session prior and the weakest since May 10.

Volume on ICE RBOB-Brent crack was up to 2,905 contracts in afternoon trading, the highest since April 7, when 3,046 contracts traded hands.

The EPA issues a RIN to track renewable fuel usage throughout the supply chain. 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.

But an overnight crude price rally was undaunted by the RINs news, and futures continued their march higher amid ever bullish demand outlooks.

NYMEX July WTI settled up 62 cents at $70.91/b, and ICE August Brent was 17 cents higher at $72.69/b.

Global oil demand is set to rise by 3.1 million b/d in 2022, returning to prepandemic levels by the fourth quarter, the International Energy Agency said June 11, warning that a "chasm" could open between supply and demand in the second half of this year if OPEC+ nations do not respond.

In its monthly oil market report, providing its first projections for 2022, the IEA confirmed expectations of recovery in oil demand despite some impact from home working and electric vehicle adoption.

It also forecast oil output by countries outside the OPEC+ production pact would rise by 1.6 million b/d next year, hitting pre-pandemic levels midyear, led by the US, with an increase of 970,000 b/d, but also supported by Brazil and Norway.

It called on OPEC+ countries to "open the taps" due to the expected gap between demand and supply in the second half of this year, following a period of stringent output control by the group in response to last year's price crash.