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Weaker RINs lure gasoline shipping into US East Coast ports: sources

Houston — A decline in the US obligation for biofuels has prompted an increase in imports from Canada and Europe into the Atlantic Coast, according to market sources and federal government data released Wednesday.

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The renewable fuels obligation for a gallon of imported gasoline has fallen from 2.29 cents/gal October 3 to 1.74 cents/gal Tuesday night, for a rate of decline of 1.6 points/day.

A smaller RINs obligation is understood to encourage imports, with buyers of imported gasoline on the hook for a smaller overall price tag.

"Definitely the recent drop in RVO has been a contributing factor in the increase in European barrels making their way to the USAC market over the past few weeks," a US light-ends source said.

The drop in RINs coincided last week with Atlantic Coast imports surmounting 500,000 b/d for the first time in a month. Imports rose 307,000 b/d to 554,000 b/d in the week ending November 2, with the daily average representing about 13 full gasoline cargoes for an entire week.

Import flow also picked up on the need for gasoline along the East Coast because of reduced rates at the region's largest refinery, Philadelphia Energy Solutions. East Coast refinery runs have been under 80% for six straight weeks through last Friday. That kind of low production last happened in March 2017.

Last week's arriving ships included the only Portugal-origin oil cargo to reach the US since October 21. Shell's Rotterdam, the Netherlands, trade office shipped 283,000 barrels of RBOB from Albufeira aboard the Yasa Hawk for its own use, with the cargo arriving at New York October 29, according to US Customs data compiled by Platts Analytics.

Lukoil, ExxonMobil, Equinor and Irving Oil also shipped gasoline to the US last week from Europe and Canada, the data showed.

Prices for RINs, which are used to prove compliance with the US Environmental Protection Agency's biofuel blending requirements, have dropped sharply in 2018. Since reaching 94.5 cents/RIN on October 23, 2017, prices for D6 ethanol RINs have fallen to 7 cents/RIN on Wednesday in early trading. D4 Biodiesel RINs reached $1.0925/RIN on October 25, 2017, and were valued between 35 and 38 cents on Wednesday in early trading.

RINs markets have been pummeled by two years of political squabbles between oil refining supporters and biofuels supporters in Congress. Refining interests have complained that high RIN prices were a financial burden and called for reform of the nation's biofuels policy. On the other hand, biofuels proponents said that refiners passed on the financial impact of RINs to consumers, and that RINs were necessary to encourage growth of the domestic biofuels industry.

The outright for New York Harbor cargoes has dropped along with RINs, tempering a small amount of the interest in imports. A cargo of RBOB without the added cost for biofuels and duties was assessed at $1.6799/gal Tuesday night, down 21.34 cents from October 19. Part of the drop can be attributed to the shift to trade in winter RVP gasoline.

--Jeffrey Bair, jeffrey.bair@spglobal.com

--Wes Swift, wes.swift@spglobal.com

--Edited by Pankti Mehta, pankti.mehta1@spglobal.com