US renewable fuel credits reach multi-month highs in spite of Trump's reelection

U.S. renewable energy credits reached multi-month highs Friday, thanks to increased demand by refiners to meet mandates as well as higher soyoil prices. This surprised traders who had expected Donald Trump’s reelection to the U.S. presidency to impact on the market.

The rising prices of the credits (also known as Renewable Identification Numbers, or RINs) are good news for biofuels producers that rely on them to cover high production costs. They also make it worse for refiners, whose profits have been slashed sharply due to an oversupply of petroleum and low demand this year.

Prices for the D4 RINs The D6 RINs are issued to producers of biomass-based diesel. The traders reported that the price of ethanol, which is issued to suppliers, increased as high as 79c each on Friday.

According to LSEG, these are the highest levels recorded since January.

The U.S. Government mandates the mixing of low carbon fuels into the transportation fuel mix in this country and issues RINs for companies that supply them. Refiners that do not reach their targets must buy RINs or face fines.

Tom Kloza, OPIS analyst, said that Trump's win in the U.S. election this week led to speculation about small refineries being able to obtain exemptions from their RIN targets under his administration.

Trump hasn't yet revealed any plans for this.

Alex Hodes is an analyst with energy brokerage StoneX. He said that there's uncertainty about whether Trump will reinstate widespread exemptions for small refineries, so small refiners might be buying to avoid being left behind.

Will Faulkner of Carbon Acumen, an industry analyst, stated that market participants expect to see fewer renewable identification numbers available next year due to government mandates, as well as a weakening fuel demand, which will reduce the renewables blend.

In the meantime, prices of soybean oil have also risen this week as a result of expectations that Trump may impose tariffs against imports for biofuel feedstocks.

Paul Niznik is the director of energy for consultancy Capstone. He said that higher feedstock prices erode producers' margins and cause them to price their RINs more. Shariq Khan, New York (Reporting and Editing by Margueritachoy)

(source: Reuters)