July 6th 2017
The Environmental Protection Agency’s (EPA) 2018 Renewable Volume Obligation (RVO) proposal for the Renewable Fuel Standard (RFS) has a lower total renewable volume than 2017, but it is likely to offer little Renewable Identification Number (RIN) price relief to the NYSE Arca Oil Index (XOI), according to Tudor Pickering & Holt (TPH) on Thursday.
The XOI includes both upstream and downstream oil companies’ stock prices. TPH said that the proposal is perceived as protecting the ethanol industry and not appeasing U.S. refiners.
The EPA issued its formal 2018 RVO proposals on Wednesday, including a lowering of total renewable volumes to 19.24 billion gal from 19.28 billion gal in 2017, maintaining corn ethanol volumes at 15 billion gal and reducing advanced renewable volumes to 4.24 billion gal from 4.28 billion gal.
“While the 2018 RVO declined from last year’s levels, we see little relief ahead for RIN prices and expect D6 and D4 RINs to remain in the 70-80cts/gal and $1.00/gal range, respectively,” TPH said.
The investment bank’s main takeaways from the 2018 RVO proposal include: the Trump administration sending a signal that it intends to protect the ethanol industry and not appease calls from U.S. refiners to lower blending requirements; ethanol blend wall issues above 10% persisting longer-term; biodiesel continuing to fill the void of challenged advanced renewable production; and no change in the point of obligation away from refiners.