Advanced biofuels RIN futures trading starts off briskly

By Sue Retka Schill | May 23, 2013

CME Group is pleased with the interest generated in its new renewable identification numbers (RINs) futures contracts. In addition to the first trades of D6 ethanol RINs reported earlier, the commodities trading exchange reported that 60 lots of D5 advanced biofuels RINs were traded earlier this week. The broker was Starsupply Commodity Brokers.

With each lot representing 50,000 RINs, the 60 D5 contracts represent 4.5 million gallons of advanced biofuels. One gallon of advanced biofuel receives 1.5 RINs credits. “The fact we’ve had 3 million D5 RINs means we’ve achieved a much higher level than we thought possible in the first two weeks,” said Dan Brusstar, senior director of energy research and product development. While new futures contracts typically start off small, he added, “so far we’ve had pretty active trading.”

The CME Group began offering three RINs contracts on May 13: D4 biodiesel, D5 advanced biofuel and D6 ethanol. Contracts are being offered monthly, and provide the flexibility for companies to do a quarterly or even annual string. “Each month we will do a final settlement based on Argus Media assessments,” Brusstar explained. The contract for 2012-vintage RINs will be open until February 2014, 2013-vintage RINs will trade up to February of 2015, and 2014-vintage RINs will be open until February 2016.  

The increased value of RINs, which is currently around 85 cents for D6 ethanol RINS, 95 cents for D5 advanced biofuel RINs and 95 cents for D4 biodiesel RINs, creates a situation where blenders and obligated parties have a greater incentive to use the new futures for risk management.  Most of the companies likely to be interested in using the new risk management tool for hedging RINs values are already trading gasoline or ethanol futures, Brusstar pointed out. And, many of the brokers currently facilitating trades in physical RINs are also trading corn, ethanol and gasoline futures as well.

CME has information about D6 ethanol RINs 2013 futures quotes, volumes and settlements, D5 advanced biofuels RINs 2013 futures and D4 biodiesel RINs on its website.