Ethanol, RIN prices slump amid worries about oversupply, RFS

18.12.2017

Ethanol and Renewable Identification Numbers tumbled Friday, amid concerns about high ethanol supplies and possible changes to the Renewable Fuel Standard.

S&P Global Platts' benchmark Chicago Argo ethanol assessment fell 2.75 cents on Friday to $1.2405/gal, the lowest level since reaching $1.1950/gal on June 7, 2005. The assessment, however, marked a rally for the commodity, which Platts confirmed traded as low as $1.17/gal earlier in the day.

Sources were divided about what was behind the drop. However, ethanol production has reached record levels in recent weeks, putting heavy downward pressure on prices.

Sources were divided about what was behind the drop. However, ethanol production has reached record levels in recent weeks, putting heavy downward pressure on prices.

"Yeah, it fell off big time," said a source. "I think it's going to be a quiet afternoon."

Another source said he thought this was because "more because people are too long."

Energy Information Administration data showed that ethanol production reached 1.108 million b/d and 1.089 million b/d for the weeks of December 1 and December 8, respectively. Those weeks marked the highest and second-highest production levels recorded. The EIA also pegged inventories at 22.374 million barrels for the week of December 8, a 17.29% increase year on year.

D6 ethanol RINs for 2017 compliance were assessed at 71.75 cents Friday, after being assessed at 74.5 cents/RIN on Thursday. D4 biodiesel RINs for the same year were assessed at 83.25 cents/RIN Friday, after being assessed at 86.25 cents/RIN on Thursday.

RIN markets have been falling recently as reports surfaced the $1/gal biodiesel tax credit could be reinstated by the end of the year. On Friday, a published report said that US Senator Ted Cruz, Republican-Texas, had proposed capping RIN prices at 10 cents/RIN. RIN prices have fallen several times in the past year when reports of possible changes to the RFS have surfaced.

The EPA issues RINs to track renewable fuel usage throughout the supply chain. Refiners and importers -- called obligated parties -- use them to show the EPA that they have fulfilled their mandated government use of renewable fuels. If the obligated party has not used enough physical product, it can buy RINs to satisfy the quota.


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