Houston — Poor blending economics and the US Environmental Protection Agency's inaction on the Renewable Fuel Standard have virtually shut down physical trading for US biodiesel, sources said Tuesday.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
"RINs are down, heating oil is down, so there is basically no biodiesel moving at all," one source said. "Completely frozen."
Heating oil prices, one of the key factors in biodiesel prices and assessments, have fallen 60.5 cents/gal since February 27 as seasonal demand has eased. Lower heating oil prices cut into biodiesel margins, making physical product less attractive to potential buyers. The April ULSD NYMEX contract settled down 47 points on Tuesday to $1.6939/gal.
Meanwhile, the EPA's decision to delay the release of the Renewable Fuel Standard's blending mandates for 2014, 2015 and 2016 are leaving producers and buyers with little guidance as to how much biodiesel will be needed to blend into US fuel stocks.
That uncertainty is keeping physical trading stagnant.
"This market is dead," another source said. "Unless something changes in soybean or heating oil, I don't see a major RIN move until the EPA is out."
EPA officials said earlier this year that the agency plans on releasing the mandates this spring.
Domestic biodiesel industry leaders have said the EPA's inaction has already forced some producers to shutter plants or reduce production. Earlier this month, Western Dubuque Biodiesel in Iowa confirmed it had shut its 30 million gal/year facility. In February, ADM said it shifted production at its 140 million gal/year facility in Velva, North Dakota, from biodiesel to other products.