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LCFS Spot Contract |
California LCFS |
Oregon LCFS |
Price July 28th, 2023 |
$ 73.50 |
$ 154.00 |
Avg. Weekly Price July 24th - July 28th, 2023 |
$ 73.70 |
$ 153.10 |
Average Monthly Price July 2023 |
$ 72.94 |
$ 148.36 |
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LCFS Futures Contract |
Pricing |
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Dec. '23 |
$ 77.00 |
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Dec. '24 |
$ 81.50 |
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Dec. '25 |
$ 87.50 |
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The California Low Carbon Fuel Standard (LCFS) market rose for a second consecutive week. Prompt credits rose $1.30/t, or 1.7%, to average $73.70/t, last week returning to levels seen earlier in the month. The prompt market had been in a choppy holding pattern since early May before entering a downward trend in early June. Gains were less pronounced down the forward curve.
LCFS strength had been driven by trader buying and strength in futures markets as the credits become more attractive options ahead of the California Air Resource Board’s new, more stringent scoping plan.
The forward structure remained in contago with the most prominent carry heading into the first quarter of 2024.
The California’s Air Resource Board’s (CARB) last workshop discussed an “auto-acceleration mechanism” as unused LCFS credits rose to record highs. During the workshop California regulators indicated that the final scoping plan may not take effect at the start of the new year much to the disappointment of stakeholders. The regulatory body indicated that the acceleration mechanism would likely not take effect until 2H 2025.
RIN Spot Contract |
D3 |
D4 |
D5 |
D6 |
Price July 21st, 2023 |
$ 3.02 |
$ 1.55 | $ 1.54 | $ 1.54 |
Avg. Weekly Price July 24th - July 28th, 2023 |
$ 3.03 |
$ 1.57 | $ 1.56 | $ 1.56 |
Average Monthly Price July 2023 |
$ 3.05 |
$ 1.56 | $ 1.55 | $ 1.55 |
Current year vintage D4 RINs recovered 1.6c/RIN, or 1.0%, on average last week. The market started the week at just over $1.595/RIN, before ending the week at $1.545/RIN as the soybean oil-to-hating oil (BOHO) spread fell on diesel strength. D4 credits remained at a 1c/RIN premium to concurrent D6 RINs, preserving the spread.
June RIN generation fell to 2.04 billion credits, down by 70MM credits, or 3.3%, from the May all-time high of 2.11 billion RINs. D4 RIN generation slumped 76MM credits from the month prior as renewable diesel and biodiesel margins both deteriorated. Domestic and foreign renewable diesel generation accounted for 56% of total D4 generation, down from last month’s 59%.
Total RIN generation for the first six months of 2023 came in at 11.39 billion accounting for 54% of the total 2023 final obligation.
The EPA denied 26 small refinery exemptions covering the 2016-2018 and 2021-2023 compliance years on July 14. The move was consistent with the EPA’s blanket SRE denials under the Biden Administration. The two remaining SREs are for the 2018 compliance year.
We have been advising since last year that the Biden Administration was unlikely to approve any SREs.
SREs were carved out in the Renewable Fuel Standard (RFS) for refiners producing 75,000 b/d or less which could prove compliance with the RFS—i.e., purchasing RINs—resulted “undue economic hardship.”
The EPA retroactively overturned 69 Trump-Era SREs starting in April of last year by denying 31 SRE waivers for 2018 and then denying all SRE petitions for 2016 through 2020. Denying SREs is bullish for RINs markets as refiners must enter the marketplace to purchase RINs to cover compliance obligations which were originally waived.
Questions? Contact our team for more information: environmental@aegis-hedging.com