August 21, 2012 / 6:47 PM / 5 years ago

Ethanol RINs slide on waiver fears

NEW YORK (Reuters) - Renewable fuel credit prices fell across the board on Tuesday as fears of an ethanol waiver roiled the Renewable Identification Numbers (RINs) market.

Benchmark E12 RINS, referring to RINs created in 2012, traded at 3.60 cents a gallon, down 13 percent from Monday’s trade level of 4.15 cents a gallon. Prices fell after Georgia became the fifth state to request a waiver for ethanol use, adding to fears that the Environmental Protection Agency (EPA) could consider removing the mandate for ethanol use on some basis.

The price of E12 RINs has dropped 28 percent from last week, according to data gathered by Reuters.

The price of RINs is still much higher than in early July when E12 RINs were trading at 1.85 cents a gallon at the beginning of the drought.

No trade was reported in E11 RINs but prices were pegged 55 to 65 points, in line with Wednesday’s level of 60 points a gallon. Untraded E13 RINs held last week’s trade level of 7.20 cents a gallon.

Corn production estimates were slashed as the worst drought in over half a century decimated the corn crop. The lower crop has increased imports of sugar-based ethanol from Brazil to a record high of 93,000 bpd last week, driving down B12 RINs to 98 cents a gallon for October delivery, down from $1.26 seen in mid-July.

Advanced biofuel RINs, D5, were seen at 42 points a gallon for the fourth quarter delivery.

RINs allows every gallon of ethanol and renewable fuel produced in the United States to be tracked to ensure compliance with the Renewable Fuel Standard Act by obligated parties such as refiners and blenders.

Obligated parties are able to buy or trade RINs to meet their quotas, now 10 percent of their gasoline production.

Refiners and blenders are also able to buy unused RINs from the previous year and the upcoming calendar year.

According to recent analyst estimates, nearly 3.5 billion gallons worth of 2011 RINs have not yet been used, of which about 2.6 billion are eligible for use against this year’s 13.2 billion gallon renewable fuel target.

Last week, U.S. gasoline demand rose to 9.3 million bpd, with 847,000 bpd of ethanol, or 9.1 percent, blended into gasoline, according to weekly data from the EIA.

Corn futures were trading at $8.30-3/4 a bushel, up $15-1/2 a bushel. Last Friday, corn prices reached a new high of $8.43 a bushel after the USDA announcement of a diminished crop.

The spread between ethanol futures to gasoline narrowed slightly to 39.5 cents a gallon in favor of gasoline from the 39.7 cents a gallon seen on Monday as ethanol rose more than gasoline.

Reporting By Janet McGurty; Editing by Tim Dobbyn

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