RPT-As EPA unveils ethanol quotas, niche RINs market revives – RTRS 5/29/2015

RPT-As EPA unveils ethanol quotas, niche RINs market revives – RTRS

 

28-May-2015 11:07:00 PM

 

(Repeats story moved earlier with no change to text)

    By Chris Prentice

    NEW YORK, May 29 (Reuters) – The long-delayed release of

U.S. biofuel blending quotas is injecting renewed life into the

niche market for ethanol credits, once the world’s hottest

commodity.

    On Thursday, prices plunged by over 20 percent in one of the

wildest day’s trading in years as traders raced to offload

credits, with growing expectations that the Environmental

Protection Agency will release easy-to-meet targets on Friday

ahead of a self-imposed June 1 deadline.

    The agency has pledged to present the targets for the three

years to 2016 by June 1, ending years of uncertainty over the

nation’s contentious renewable fuels policy.

    Three industry sources say they expect an announcement as

early as Friday.

    One U.S. trader said “nervous nelly” selling as traders

guessed the timing and contents of the announcement touched off

a selling spree that saw prices of renewable fuel credits, known

as Renewable Identification Numbers (RINs), sink as much as 15

cents each, or 22 percent, to as low as 52 cents.

    The D6 paper credits, which are bought by oil refiners and

imports to meet quotas for blending biofuels into gasoline and

diesel, had recovered slightly to 59 to 60 cents by the end of

trading as jitters subsided.

    But market participants say it marked the return of wild

prices and was likely the first leg down in a broader sell-off

that could see prices fall to levels not seen in years.

    Some traders, gas blenders, and refiners have loaded up on

credits, fearing a repeat of the surge in prices seen two years

ago and as demand for diesel and gasoline have remained

surprisingly robust. That has kept prices elevated above 60

cents since the start of the year.

    Prices may drop to as low as 35 cents as refiners and

importers sell excess supplies once they finally get real policy

clarity from the EPA, Citigroup research analyst Aakash Doshi

said in a research note. He pegged prices in a 35-70 cent range,

based on expectations the EPA would modestly raise required

volumes. [ID:nL1N0YD1CX]

      

    REFINER SQUEEZE

    After months of relatively stable prices, Thursday’s session

gave traders another taste of 2013 when a buying frenzy among

refiners, who worried they wouldn’t have enough credits to meet

blending targets, sent prices as high as $1.45.

    Two years ago, the surge in prices fueled criticism among

refiners who complained about the additional regulatory and

financial cost of complying with government mandates.

    Now, a prolonged sell-off in RINs could mean refiners that

loaded up in the first quarter when prices were as high as 72

cents may have missed an opportunity for now to scoop up

lower-cost credits.

    Last year, seven refiners, including Valero Energy Corp

<VLO.N>, the biggest U.S. refiner, spent at least $1 billion on

RINs credits, according to companies’ public filings.

    That compares with at least $1.35 billion spent on RINs by

nine independent refiners in 2013. [ID:nL1N0MO2B6]

    They have bought at a clip this year. In the first quarter,

five refiners spent at least $239 million, according to public

filings.

    “How do you target yourself if you don’t know what the

requirements are?” said Steve Nicholson, an analyst with

Rabobank AgriFinance in St. Louis, Mo. “There could be a lot of

volatility as the market digests this.”

 

28-May-2015 11:07:00 PM

 

(Repeats story moved earlier with no change to text)

    By Chris Prentice

    NEW YORK, May 29 (Reuters) – The long-delayed release of

U.S. biofuel blending quotas is injecting renewed life into the

niche market for ethanol credits, once the world’s hottest

commodity.

    On Thursday, prices plunged by over 20 percent in one of the

wildest day’s trading in years as traders raced to offload

credits, with growing expectations that the Environmental

Protection Agency will release easy-to-meet targets on Friday

ahead of a self-imposed June 1 deadline.

    The agency has pledged to present the targets for the three

years to 2016 by June 1, ending years of uncertainty over the

nation’s contentious renewable fuels policy.

    Three industry sources say they expect an announcement as

early as Friday.

    One U.S. trader said “nervous nelly” selling as traders

guessed the timing and contents of the announcement touched off

a selling spree that saw prices of renewable fuel credits, known

as Renewable Identification Numbers (RINs), sink as much as 15

cents each, or 22 percent, to as low as 52 cents.

    The D6 paper credits, which are bought by oil refiners and

imports to meet quotas for blending biofuels into gasoline and

diesel, had recovered slightly to 59 to 60 cents by the end of

trading as jitters subsided.

    But market participants say it marked the return of wild

prices and was likely the first leg down in a broader sell-off

that could see prices fall to levels not seen in years.

    Some traders, gas blenders, and refiners have loaded up on

credits, fearing a repeat of the surge in prices seen two years

ago and as demand for diesel and gasoline have remained

surprisingly robust. That has kept prices elevated above 60

cents since the start of the year.

    Prices may drop to as low as 35 cents as refiners and

importers sell excess supplies once they finally get real policy

clarity from the EPA, Citigroup research analyst Aakash Doshi

said in a research note. He pegged prices in a 35-70 cent range,

based on expectations the EPA would modestly raise required

volumes. [ID:nL1N0YD1CX]

      

    REFINER SQUEEZE

    After months of relatively stable prices, Thursday’s session

gave traders another taste of 2013 when a buying frenzy among

refiners, who worried they wouldn’t have enough credits to meet

blending targets, sent prices as high as $1.45.

    Two years ago, the surge in prices fueled criticism among

refiners who complained about the additional regulatory and

financial cost of complying with government mandates.

    Now, a prolonged sell-off in RINs could mean refiners that

loaded up in the first quarter when prices were as high as 72

cents may have missed an opportunity for now to scoop up

lower-cost credits.

    Last year, seven refiners, including Valero Energy Corp

<VLO.N>, the biggest U.S. refiner, spent at least $1 billion on

RINs credits, according to companies’ public filings.

    That compares with at least $1.35 billion spent on RINs by

nine independent refiners in 2013. [ID:nL1N0MO2B6]

    They have bought at a clip this year. In the first quarter,

five refiners spent at least $239 million, according to public

filings.

    “How do you target yourself if you don’t know what the

requirements are?” said Steve Nicholson, an analyst with

Rabobank AgriFinance in St. Louis, Mo. “There could be a lot of

volatility as the market digests this.”

 

 

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