RIN Values Jumped to a Two Month High Friday after the US Treasury Issued Preliminary Guidance on the Clean Fuels Production Credit

The rally continues in energy markets to start the week with diesel futures once again leading the push higher. The prompt February ULSD contract is up more than 21 cents since Wednesday morning, and still has roughly 10 cents to run before it hits the next obvious stopping point on the chart near the June high of $2.65. RBOB gasoline futures aren’t benefitting from the weather-induced factors that have aided diesel’s big rally but are still up just over a dime in the past 3 sessions.

Another incident with a disabled Russian “shadow fleet” tanker, this time in the Baltic Sea, is giving Western nations more ammunition for their sanction policies, while Russia promises to continue its development despite those restrictions. The big question is whether or not the new US rules will actually slow down buying from China and India, or if it will just mean more discounted fuels for the two biggest beneficiaries?

Valero issued a notice to LA-area regulators that it was planning 17 days of flaring at its Wilmington refinery starting today. That report came over the weekend, and just a few days after the facility reported an unplanned upset, suggesting extended repairs being made. Marathon reported 2 unplanned emergency flaring events at its Wilmington facility early this morning. So far there doesn’t appear to be any direct impact on LA-area refineries from the fires burning to the North. Chevron’s El Segundo facility is the closest plant to the fires, roughly 22 miles south, while the cluster of facilities in the Torrance/Carson/Wilmington area are around 30-35 miles away.

Kinder Morgan restarted its pipeline pumping operations late last week as precautionary power outages were lifted, easing concerns of fuel shortages further east from the Pacific Coast, to Las Vegas and Phoenix.

Gulf Coast refineries seem to have escaped last week’s ice storm relatively unscathed, suggesting that latest round of winter weather will have more detrimental impacts on demand than supply.

RIN values jumped to a 2 month high Friday after the US Treasury issued its long awaited preliminary guidance on the Clean Fuels Production Credit, AKA Section 45Z of the Tax code. Perhaps most notable from the preliminary guidance is that imports of Used Cooking Oil (UCO) will not be eligible under that model until additional regulations are made to prevent the suspected fraudulent blending of virgin palm oil that’s been ongoing for the past few years. While that news is bad for many producers who have been leaning on discounted imports to stay afloat in a very challenging market, SAF producers did get a win with the agency allowing either the CORSIA or GREET models to determine Carbon Intensity scores (which are needed to determine the amount of credit each fuel is eligible for) while non-SAF producers will have to use the GREET model. There are still many details left to be finalized in the ruling, many of which revolve around how much credit to give “climate-smart agriculture” (CSA) practices.

Baker Hughes reported a decrease of 2 oil rigs and 3 natural gas rigs drilling in the US last week.