The price of ethanol D6 RINs on June 16 was assessed at its lowest level in three months following news that the White House would release preliminary 2021 and 2022 blending mandates for the Renewable Fuels Standard in July.
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Current-year D6 RINs ended the day at $1.30/RIN, up from the $1.25/RIN traded in the morning, but down 14.75 cents on the day and the lowest level since March 30, according to S&P Global Platts assessments.
Refiners and biofuel producers have been waiting for the release of the blending mandates for 2021 after the Environmental Protection Agency missed its Nov. 30 deadline. That has roiled the market for Renewable Identification Numbers, the EPA credits that obligated parties like refiners need to buy to meet their annual RFS volume obligation.
Also, the Platts Renewable Volume Obligation plunged to an eleven-week low of 15.98 cents/gal on June 16, down 1.61 cents/gal on the day and down 7.44 cents/gal in the last seven sessions.
Refiners and fuel traders watch the RVO - a value calculated using daily RINs prices and biofuel mandates - for per-gallon compliance costs.
The Office of Management and Budget said late June 15 the White House would release preliminary blending mandates in July, followed by final blending mandates in December.
"This is in line with our expectations that the White House is waiting for a Supreme Court decision on the small refinery exemption case before proceeding with the mandates. We expect the SCOTUS decision to be announced any day now," said Matthew Blair, analyst with Tudor Pickering Holt in a June 16 research note.
"We believe investors' baseline expectations should reflect a cut to the blending mandates, which would significantly loosen supply/demand of the [approximately 20 billion] RIN program considering there's roughly +2.6 [billion] incremental D4 RINs coming from new [renewable diesel] projects in 2021-22 alone," he added.
UNCERTAINTY OVER MANDATE, SCOTUS RULING
The lack of a mandate ahead of a decision from the Supreme Court on the small refinery exemption, which was heard on appeal on April 21, tripled the price of RINs between the first and second quarter of 2021.
But RINs prices have recently fallen on speculation, driven by some news reports, that the RVO would remain unchanged for 2021, or would be reduced given the negative impact of the coronavirus on 2020 refined products demand.
Many small refiners have stayed out of the RINs market on the hopes of a lower RVO, or a favorable ruling from the Supreme Court on exemptions.
The small refinery exemption is for refineries smaller than 75,000 b/d that can prove they will experience extreme hardship by complying with their annual RVO. On April 27, the US Supreme Court heard on appeal the small refinery exemption case brought by HollyFrontier after it was denied the exemption by the Tenth District Court.
Small refinery owner Calumet Specialty Partners said June 9 that they do not see any cash outlay for RINs in the near future to meet their RVO as they have applied for small refinery exemptions in 2019 and 2020.
"We've received the exemptions [in previous years]. We believe we are still in a good spot to receive the exemptions," said CEO Steve Mawer at the virtual Bank of America Merrill Lynch 2021 Energy Credit Conference.
The Supreme Court decision could come as early as June 17, according to some sources, which would remove another element of uncertainty for refiners.
BROADER MARKET IMPACT
The rise and fall of RINs has also impacted the futures markets, as many traders looking for a more liquid market have been trading the cracks spreads of RBOB and ULSD on both the NYMEX and ICE.
The nominal ICE RBOB crack has fallen about $3/b over the last week, standing at $16.20/b in late afternoon trade on June 16.
Traders said that cracks tend to move faster than RINs, making it an easy sell for speculators.
"There is relentless selling on NYMEX RBOB and ULSD RINs as they have embedded RINs in their prices," said Sergio Baron, analyst with S&P Global Platts Analytics.
From a refiner's perspective, however, the best economic indicator is the RIN-less crack, he said, adding it is expected that US RIN-less cracks "will remain largely unchanged and maintain parity with other refining centers."