Texas renewable diesel flows up as Calif. demand eases

Renewable diesel production at US biorefineries in May hit an all-time high of about 6.86 million barrels. This increase follows the implementation of record-high biofuels blending targets at the start of the year, according to the latest RIN generation data from the Environmental Protection Agency (EPA).

Higher run rates through the second quarter, combined with elevated and volatile diesel prices nationwide, have made California buyers hesitant to commit to high-volume R99 spot purchases amid fresh supply. However, Texas's 20¢/USG diesel excise tax abatement, applicable to renewable diesel, has positioned the state, particularly Houston's fob truck spot market, as an attractive secondary supply outlet.

Market participants have reported R99 on offer from various Gulf coast producers throughout June. The tax abatement now makes renewable volume competitive with conventional ULSD in the region. Offers for R99 fob truck in Houston were heard at July Nymex ULSD +9¢/USG, which sources indicated represented about a 5¢/USG discount versus conventional ULSD after accounting for the tax abatement. In comparison, spot R99 via pipeline in California recently traded at double-digit discounts of 35¢/USG and 80¢/USG, respectively, to the corresponding Los Angeles and San Francisco CARB complexes.