The US current-year renewable volume obligation Tuesday rose to its highest level since October 8 as market participants have expected the Environmental Protection Agency to grant fewer small refinery exemptions in the coming months.
The current-year renewable volume obligation Tuesday rose to its highest level since October 8 as market participants have expected the Environmental Protection Agency to grant fewer small refinery exemptions in the coming months.
"There are some lawsuits taking place on SREs that are showing positive signs. If those go through then prices, with fewer SREs, should increase," said one source.
"The market sentiment is that Wheeler is going to do fewer," the source added, referring EPA Acting Administrator Andrew Wheeler. President Donald Trump on Friday said he intended to nominate Wheeler to be permanent administrator.
S&P Global Platts assessed the current-year RVO at 2.0371 cents/gal Tuesday, up 10.56 points/gal on the day. The RVO is a calculated value that takes into account the value of each category of renewable identification number and the biofuel blending mandates published by the EPA.
The EPA can grant an exemption from biofuel blending mandates to a refinery with a capacity of less than 75,000 b/d if that refinery can demonstrate that "compliance with the RVOs would cause the refinery to suffer disproportionate economic hardship," according to the EPA website.
Over 2018, the EPA provided data that showed a record number of exemptions were granted retroactively, reducing the number of RINs needed for compliance.
Current low prices, however, have prompted many to see fewer of the exemptions on the horizon, as it would be harder to demonstrate economic hardship from a 2 cents/gal RVO when the RVO hovered above 10 cents/gal in 2017.
RINs have climbed over the past week amid bullish indicators, including obligated parties returning to the market.
"They've got to buy at some point," said one source. "A lot of the obligated buyers have been sidelined. There's no reason to step in the way of the knife as it falls."
