News
07/08/26
Biofuel mandates give extra boost to US jet output
Houston, 7 August (Argus) — The boom in US jet fuel output driven by disruptions
from the US-Iran war is getting extra help by the economics associated with
biofuel blending in road fuels. US refiners have been on a tear with jet fuel
output this year, setting production records as the Mideast war curtailed flows
and prices rose. Output has fallen since late June highs, to 2.068mn b/d in the
week ended 31 July, according to the latest weekly data by the US Energy
Information Administration (EIA), but remains 4.3pc higher than a year earlier.
But refiners also have extra incentive to push more of their output toward jet
fuel thanks to higher costs associated with meeting the US' Renewable Fuel
Standard (RFS) for road fuels. In the four months since the Environmental
Protection Agency finalized biofuel blend mandates for 2026 and 2027, prices for
renewable identification numbers (RINs) created by blending and the Argus
Renewable Volume Obligation (RVO) have reached all-time highs, signaling higher
blending costs across the refining space. The RVO, which measures an obligated
party's compliance costs for biofuel blending via RIN credit prices, peaked at
39.28¢/USG on 7 July after being valued near 22¢/USG in early March. Unlike
diesel, petroleum-based jet fuel is not an obligated fuel bound by the RFS. As a
result, refiners with the flexibility to adjust distillate yields may favor jet
fuel production over diesel. Higher yields meet global demand Higher jet runs at
US refineries have translated into greater export availability at a time when
global supply remains disrupted through the strait of Hormuz, where 20-25pc of
global jet fuel exports have historically transited. US jet fuel exports rose by
62pc year-on-year to an average of 308,000 b/d in July, according to Kpler
tracking data, while EIA statistics indicate weekly volumes reached 445,000 b/d
last week, or more than triple levels a year earlier. Yet, inventories remain
5.7pc above year earlier levels at 46.9mn bl. The Gulf coast is driving almost
all of the increase in exports as regional production rose by 14.1pc annually to
1.185mn b/d last week, according to the EIA. Production on the US east coast,
midcontinent and west coast remained below year-earlier levels. US Gulf exports
comprised roughly 90pc of total national jet fuel exports in July, according to
Kpler data. US jet cracks have strengthened since early June, peaking near
$79/bl on 29 July before declining to roughly $67/bl by 4 August compared to
just $23.66/bl at the same point last year. Refiners double-down on jet Refiners
are poised to continue taking advantage of strong jet fuel margins in the near
term, with multiple jet fuel capacity expansions either planned or recently
completed. HF Sinclair completed a project allowing it to switch roughly 7,000
b/d of output between diesel and jet fuel at its 145,000 b/d Puget Sound
refinery in Anacortes, Washington. Phillips 66 is planning a two-phase project
at its 105,000 b/d Ferndale, Washington, refinery to increase jet fuel capacity
by 12,000 b/d over 2026 and 2027. Marathon added 10,000 b/d of jet production
capacity at its 253,000 b/d refinery in Robinson, Illinois, and brought 30,000
b/d of jet capacity online at its 617,000 b/d Garyville, Louisiana, refinery in
March. The payoff for any jet output expansions may already be underway. In its
second quarter earnings call in late July, independent refiner Valero said it
expected third quarter margins for jet to widen because of an open arbitrage to
Europe and as the US transitions to winter-grade diesel specifications. By Blake
Del Papa, Matthew Cope and Anjali Shenoy Send comments and request more
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