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RINs jump, then retreat after US EPA biofuels-blending announcement

Houston — Renewable Identification Numbers spiked briefly after Friday morning's biofuels announcement from the US Environmental Protection Agency, but quickly retreated below Thursday's levels as traders saw little support in the plan that avoided further waiving of blending mandates.

Ethanol (D6) RINs for 2019 compliance traded as high as 27 cents/RIN Friday morning after the announcement before retreating to 24 cents/RIN, where S&P Global Platts assessed the credits Thursday. By mid-morning, D6 RINs for 2019 compliance were heard offered at 22 cents/RIN.

"They're going the wrong way," said one market participant.

The US Environmental Protection Agency issues RINs 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.

Friday's plan had been discussed in different forms for nearly two years, leaving market participants with expectations of several different results that could have been more bullish for 2019 and 2020 RINs.

The announcement, however, did not include any reallocation of waived biofuel-blending mandates from previous years into current compliance years, which sources said would have been bullish for pricing.

Instead, the EPA said it will increase conventional ethanol blending beyond 15 billion gallons, starting the with 2020-21 mandates, through a supplemental rulemaking.

Sources highlighted the lack of details in Friday's media release, with an EPA official saying more details would be released next week.

For the time being, traders viewed the announcement as a non-issue for the market, despite the biofuels industry hailing it as a victory.

"If they can hand the market status quo but make people happy at the same time then it's a win-win," said another source.

-- Josh Pedrick, joshua.pedrick@spglobal.com

-- Edited by Derek Sands, newsdesk@spglobal.com