U.S. Renewable Fuel Credits Reach Multi-Month Highs

By Shariq Khan
NEW YORK (Reuters) – On Friday, U.S. renewable fuel credits surged to multi-month highs due to heightened demand from refiners needing to comply with mandates and rising soyoil prices, surprising traders who anticipated Donald Trump’s reelection would negatively impact the market.

The climb in credit prices, known as Renewable Identification Numbers (RINs), is beneficial for biofuel producers who rely on these credits to offset high production costs. Conversely, this increase adds to the difficulties faced by petroleum refiners whose profit margins have diminished significantly this year because of oversupply and weak demand.

Prices for both D4 RINs, associated with biomass-based diesel producers, and D6 RINs, linked to ethanol suppliers, climbed to as high as 79 cents on Friday, marking their highest levels since January, according to LSEG data.

The U.S. government mandates the mixing of low-carbon fuels into the country's transportation fuel mix, issuing RINs to suppliers. Refiners that fail to meet their targets can purchase RINs from others or face penalties.

Following Trump's recent electoral victory, there was speculation regarding easier access to RIN generation target exemptions for small refineries under his administration, as noted by OPIS analyst Tom Kloza. However, plans to reinstate these exemptions have yet to be detailed by Trump.

Analyst Alex Hodes from energy brokerage StoneX remarked, "There's uncertainty around whether Trump will reintroduce widespread small refinery exemptions, so some small refiners may be buying now to avoid being caught short."

Market participants predict a reduction in available RINs for trade next year due to stricter government mandates and diminished fuel demand impacting renewables blending, according to Will Faulkner, founder of industry analysis firm Carbon Acumen.

Furthermore, soybean oil prices have also increased this week amidst expectations that Trump might implement tariffs on imported biofuel feedstocks. The rise in feedstock prices negatively affects producer margins, compelling them to price their RINs higher, as stated by Paul Niznik, director of energy at consultancy firm Capstone.