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LCFS Spot Contract |
California LCFS |
Oregon LCFS |
Price May 19th, 2023 |
$ 82.50 |
$ 137.50 |
Avg. Weekly Price May 15th - May 19th, 2023 |
$ 83.30 |
$ 138.00 |
Average Monthly Price May 2023 |
$ 84.30 |
$ 135.60 |
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LCFS Futures Contract |
Pricing |
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Dec. '23 |
$ 86.50 |
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Dec. '24 |
$ 93.25 |
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Dec. '25 |
$ 99.00 |
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The California Low Carbon Fuel Standard (LCFS) market tracked lower for a second consecutive week. Prompt credits shed $1.40/t, on average, last week. 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 spot forward structure flattened significantly and slipped into backwardation late in the week.
California’s Air Resource Board (CARB) will hold a workshop to discuss an “auto-acceleration mechanism” as unused LCFS credits rose to record highs. The workshop is scheduled for May 23 and will accept comments up to June 6.
RIN Spot Contract |
D3 |
D4 |
D5 |
D6 |
Price May 19th, 2023 |
$ 2.08 |
$ 1.51 | $ 1.50 | $ 1.49 |
Avg. Weekly Price May 15th - May 19th, 2023 |
$ 2.11 |
$ 1.52 | $ 1.51 | $ 1.49 |
Average Monthly Price May 2023 |
$ 2.08 |
$ 1.55 | $ 1.54 | $ 1.52 |
D4 RIN prices shed 0.4¢/RIN, or 2.53%, as strong biodiesel margins weighed on credits. The D6 market was largely in a holding pattern awaiting a mid-June deadline for the finalization of the EPA’s set rule, while the weeks leading up to the announcement are likely to see press leaks and rumors stir up market activity.
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.
Debt ceiling negotiations saw non-farm state Republicans look to put advanced biofuel credits on the chopping block, while protecting SAF and carbon capture projects. President Joe Biden threatened to veto the bill, quashing the potential bullish headline impact.
Lawmakers issued a letter in late-April requesting the EPA to delay the implementation of its ambitious eRIN program. The letter cites that the RFS was never intended to be used as "a tool to electrify transportation," and brought up further concerns with the eligitibility of OEMs to generate RINs as well as challenging the overall feasibility of the program.
News 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 this move, 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 chance of a pivot in the EPA's approach to SREs continued to provide underlying bearish sentiment. A reversal or dovish change in SRE policy would have an outsized impact on the D6 category.
Market activity is likely to remain curtailed ahead of guidance from the EPA expected in June.
Questions? Contact our team for more information: environmental@aegis-hedging.com