To quickly access the page content, please click on the links below:
|
||
LCFS Spot Contract |
California LCFS |
Oregon LCFS |
Price June 9th, 2023 |
$ 84.00 |
$ 140.00 |
Avg. Weekly Price June 5th - June 9th, 2023 |
$ 82.80 |
$ 139.70 |
Average Monthly Price June 2023 |
$ 83.07 |
$ 139.36 |
|
|
|
LCFS Futures Contract |
Pricing |
|
Dec. '23 |
$ 86.75 |
|
Dec. '24 |
$ 93.00 |
|
Dec. '25 |
$ 100.25 |
|
The California Low Carbon Fuel Standard (LCFS) was largely stable last week. Prompt credits shed $0.575/t, on average, last week. The prompt market has largely been in a choppy holding pattern since early May.
LCFS strength has 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 showed a modest contango through Q4 2024.
Last month’s California’s Air Resource Board (CARB) 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 June 9th, 2023 |
$ 2.19 |
$ 1.49 | $ 1.48 | $ 1.46 |
Avg. Weekly Price June 5th - June 9th, 2023 |
$ 2.13 |
$ 1.43 | $ 1.42 | $ 1.40 |
Average Monthly Price June 2023 |
$ 2.13 |
$ 1.43 | $ 1.42 | $ 1.41 |
Current year vintage D4 RINs fell $0.018/RIN, or 1.15%, on average last week, though ended the week on a strong note at $1.595/RIN as the RIN market responded to mounting BOHO losses. The rising D4 market lifted the wider RINs complex closing out the week on a strong note.
Headlines closing out the week proved moderately bullish as Bloomberg reported Friday, June 9, the Biden administration plans to lift the advanced mandate though not by as much as the biodiesel industry had requested, citing unnamed sources.
Retailer industry groups SIGMA and NATSO closed out the week urging the White House to increase the advanced mandate and remove the eRIN program for 2024.
The EPA delivered the final RFS ‘Set Rule’ to the White House Office of Management and Budget (OMB) on May 15. The EPA is now required to issue a final RFS for 2023, 2024 and 2025 by June 14.
EPA Administrator Michael Regan issued comments at a House Agriculture Committee hearing indicating the EPA is likely to cave to both industry and lawmaker pressure to increase the advanced biofuel mandate in the final ruling expected in June.
News back in February that United Refining was denied its SRE hardship waiver by the Third Circuit court added bullish undertones to the RIN complex as the move adds additional demand to the marketplace. Trade organization Growth Energy entered comments in support of enforcing SREs in its case against the EPA. A full denial of all SREs would represent more than 1.6 billion RINs.
Prior to this, the approval by a federal court of a SRE for Calumet Special Products 30,000 b/d refinery in Montana provided bearish undertones to RIN markets.
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.
A court ruling earlier this month halted compliance obligations for two refineries with existing SRE petitions taking issue with the retroactive nature of the SRE denial.
If approved the SRE ruling will prove very bearish for the wider RIN marketplace as participants will view the decision as a shift in the EPA’s approach to granting SREs. Notes from the court were strongly in favor of granting the SREs, as the court made it clear it intends to handle SREs as originally intended by the RFS—i.e., waive RFS compliance if undue hardship can be demonstrated—and to allow waivers which were issued in an “unlawful retroactive application.”
Questions? Contact our team for more information: environmental@aegis-hedging.com