Diesel Leading Price Action With Modest Gains

Energy markets are sliding to end the week with the US President’s pledge to refill the SPR “quickly” being taken about as seriously by traders as the claims that 300 year old people are collecting Social Security so far.

Diesel prices are once again leading the price action, wiping out most of yesterday’s rally, but staying on pace for a 2nd straight week of modest gains. Cold winter weather and a dramatic shift in alternative diesel fuel production have both contributed to the swings in diesel prices, which have been noteworthy, but remain muted by historical standards.

Want to see how dependent the biofuel community was on the BTC? Look at the EPA’s RIN generation data from January below that shows the collapse in D4 (bio mass diesel) RIN generation after the BTC expired, even though SAF production saw a big % increase during the month. Imported biofuels (which don’t qualify for anything under the new CFPC) declined by 95% during the month, while domestic production dropped by 42% even though SAF production tripled vs December’s figures, which helps explain why bio and renewable blends that were available in several markets last year have vanished suddenly in 2025.

You can also see in the chart below how the biodiesel producers have gotten creative with their RIN generation before and after a previous BTC expiration at the end of 2016 so it’s not too surprising to see the spike at the end of 2024 followed by the collapse in January, and now we’ll see if anyone at the EPA chooses to audit those figures to see if that’s what physically happened at the plants.

RIN values continued to push to new 15 month highs following the EPA’s data release, with D4 values now above $.91/RIN while D6 values are holding around $.87. The rally in RIN values so far in 2025 has added roughly 50 cents/gallon to renewable diesel producers total government subsidies, which is almost enough to offset the difference between the BTC’s $1/gallon and the CFPC’s mystery amount that would range somewhere between 30-40 cents/gallon for most domestic producers, but given the advantages SAF gets in the new ruling, those who can make Jet fuel out of soybeans instead of Renewable ULSD will continue to do so.

Yesterday’s DOE report followed the seasonal script with gasoline inventories continuing to follow their seasonal drawdown as the spring RVP transition moves through its early phases, while distillate stocks remain tight on the coasts and bloated in the middle. Perhaps the most notable data point on the week was that PADD 5 refinery runs increased 5% despite the ongoing shutdown of PBF’s Martinez facility, suggesting other plants in the region have been able to crank up run rates to help alleviate the loss of production. That phenomenon has helped SF Bay spot differentials for gasoline pull back more than 60 cents/gallon since peaking last week, while diesel spot values have continued to tick higher.

Chevron’s Pasadena refinery reported a spill to Texas regulators Thursday, but that incident doesn’t appear to have impacted refining operations. With only 1 other refinery upset reported in the back half of the week it appears that the state’s refineries have made it through the recent cold snap relatively unscathed.