RVO surges as D6 RINs rally on court ruling

The Argus Renewable Volume Obligation (RVO) has surged by 59pc over 14 consecutive sessions, buoyed by a court ruling that struck down three small refinery exemptions (SREs) issued by the Environmental Protection Agency.

Compliance costs under the Renewable Fuel Standard (RFS), as measured by the Argus RVO, have surged by 1.5¢/USG since 17 January to 4.04¢/USG yesterday, surpassing the 4¢/USG mark for the first time since June 2018.

The Argus RVO retreated slightly by midday today, falling by 0.14¢/USG to 3.9¢/USG.

RIN prices began rising when traders perceived a December D3 RIN shortage. The rally continued after the US 10th Circuit Court of Appeals on 24 January ruled to nullify multiple SREs.

Current year ethanol D6 RINs have increased by more than 50pc since 24 January, rising by 8.4¢/RIN to trade at 24¢/RIN before midday today.

Meanwhile, current year D3 RIN prices increased from 80.5¢/RIN on 17 January to trade as high as 157¢/RIN yesterday, a gain of 76¢/RIN.

D3 RIN prices seemed to fall off slightly by midday today, with 2020 vintage D3 RINs valued flat to 2019 vintage D3 credits, which traded at 155¢/RIN.

RFS requires refiners, importers and other companies to each year ensure minimum volumes of renewables are blended into gasoline and diesel they add to US road fuel supply. Obligated parties prove compliance by acquiring RINs representing each biofuel-equivalent gallon of physically blended fuel. Parties may either blend fuel or acquire RINs through trade.

Poor biodiesel production economics, as measured by the heating oil-soybean oil (HOBO) spread, also has driven the need forhigher D4 RIN credits to incentivize blending more expensive biomass-based biodiesel into conventional diesel.

Biomass-based diesel D4 RINs with 2020 vintage rose by 19¢/RIN to 49.25¢/RIN between 24 January and yesterday. Prices have climbed 24.5pc since so far this year, a period in which the HOBO spread fell by 8¢/USG to -68¢/USG, a level not seen since November 2017.

D4 credits fell slightly before midday, with bids at 46¢/RIN and offers at 49¢/RIN.

As the RFS compliance deadline at the end of March approaches, RIN values are not likely to lose momentum. Obligated parties continue to seek RINs to reach their obligated volumes before then.

By Thom Dwyer and Jacqueline Reigle