Crude Futures Drop On OPEC+ Output; Renewables Rebound

Energy futures are sliding in Tuesday’s pre-market trading with the distillate contracts leading the way lower by dropping nearly 2% so far this morning. OPEC+ ramping up oil production and wavering U.S. economic outlook (and trust in reporting its status) are being blamed for this morning’s bearish sentiment. The prospect of the White House following through on issuing another round of sanctions on Russian oil importers could buoy prices, but for now it looks like TACO Tuesday.

The area of interest the National Hurricane Center is tracking off the coast of the Carolinas and Georgia has been given an increased chance of organizing into a storm overnight. The area isn’t home to any refineries but it is still too early to tell if a rotating storm would ride up into the tri-state area, or head out to sea the same way tropical storm Dexter is currently. The NHC is also tracking a disturbance moving off Africa’s West Coast, which is expected to form somewhere in the middle of the Atlantic next week.

This week’s renewables recap:

The EIA’s monthly stats show U.S. RD production hit a 2025 high in May following a slower start to the year, likely due to the expiration of the Blender’s Tax Credit, uncertainty (at the time) around the 45Z Clean Fuel Producer Credit, and pending guidance on blending rules. The EPA’s proposal for the 2026 renewable volume obligation will raise the requirement to blend biomass-based diesel by about 70%, leaving the market expecting production increases to continue.

Speaking of biomass-based, Chinese exports of used cooking oil to the US are expected to increase substantially in July and August following a large drop after China removed their 13% export tax rebate for UCO back in December. Policy changes to produce RD in the U.S. using animal tallow instead of imported UCO and U.S. tariffs on Chinese imports tempered exports to the US earlier this year, but a growing price gap between U.S. delivered UCO and FOB China UCO, along with the fact that it can still be used for SAF production under the new 45Z rules, led to the recent resurgence in U.S. purchasing of the feedstock.

As for a more localized view, New Mexico’s Clean Transportation Fuel Program is set to take effect next year but details have yet to be finalized. The program must go into effect no later than July 1, 2026, according to the law passed a couple of years back, but a proposal made earlier this year would have it start Feb 1, 2026, pending committee hearings set to take place over the next two months. Details are scant but its been indicated that the program will be built around the LCFS model that California started (and Oregon and Washington adopted) which assigns Carbon Intensity (CI) values to different types of fuels. Gallons sold in the state will generate credits or obligations, depending on their respective CI scores and where that stacks up against mandated target CI level.