RIN Trading Adding To The Strong Rally To End June With Both D4 And D6 Prices Reaching A Fresh 2-Month High

Refined product futures dropped sharply on Monday, but you may never know it since spot markets east of the Rockies were essentially closed for the day, and futures are rallying this morning to wipe out those losses. Looking at price's vs Friday’s settlement, ULSD prices are up a couple of cents so far on the week, while gasoline prices are down a few cents. 

West Coast spot markets were still assessed, so buyers in those regions did get a two-day discount that they’ll be racing to take advantage of today as long as the recovery rally continues.

The Saudi-Russian output cut announcement from Monday has had little influence so far with WTI and Brent prices up just around $1/barrel from their end of June levels. 

Weak manufacturing data from the US and China were getting credit for the earlier selling, with the jobs report Friday getting a lot of chatter as the market prepares to bet on the next FED rate hike.

Toyota announced a major breakthrough in its battery technology over the weekend, with ambitious claims of halving costs and charging times while doubling range for EVs. Read this FT article that gives the headlines a reality check.   

While most spot markets took the day off Monday, RIN trading was active, adding to the strong rally we saw to end June with both D4 and D6 prices reaching a fresh 2 month high, and erasing the heavy losses seen in the immediate wake of the EPA’s volume targets 2 weeks ago. While many focused on the EPA’s lowering of the ethanol blend requirement, much to the chagrin of food to fuel producers, some refiners are arguing (aka complaining) that this leaves a blend percentage at unreachable levels north of 10%, which will keep RIN prices high. 

Canada’s clean fuel standard started in July and will ramp up requirements for biofuels over the next few years in order to meet increasingly stringent emissions requirements. While the program’s targets aren’t aggressive over the next 18 months or so, they are already creating some competition for US biofuel supplies.

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