UPDATE 3-Ethanol RINs break back above 50 cents; Philly refiner blames RFS

Wed Feb 5, 2014 9:49pm EST

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(Updates with refiner comment paras 4-5)

NEW YORK Feb 5 (Reuters) - The price of Renewable Identification Number (RIN) credits extended gains on Wednesday, with refiner buying helping push ethanol RINs for the 2013 compliance year past the 50 cent mark for the first time since September, traders said.

E13 RINs traded as high as 53 cents each, traders said, and were heard traded at 52.5 cents by mid-afternoon. The credits traded at a high of 46 cents the previous day, following several days of steadily rising markets.

Three traders told Reuters they saw Philadelphia Energy Solutions (PES) among refiners buying ethanol RINs in large quantities since Thursday, when prices began to soar. PES is the owner of a 335,000 barrels-per-day refinery complex in Philadelphia, Pennsylvania - the largest on the East Coast.

A spokeswoman for PES said the company's buying was "very small relative to the market".

"The reason that prices are again soaring out of control has to do with the fundamental flaws with RFS2 (Renewable Fuels Standard) which act to the disbenefit of merchant refiners who are forced to buy RINs for all bulk sales," the spokeswoman said in an email to Reuters.

RINs are a market component of the U.S. government's Renewable Fuels Standard according to which refiners must blend gasoline and diesel with a certain amount of renewable fuel, mainly corn-derived ethanol. Refineries that blend receive RINs and those that do not must instead buy them.

Little-noticed by the industry in previous years, RIN prices went through the roof last year when refiners warned the amount of renewable fuel they needed to blend into gasoline would soon exceed what they regarded as a maximum.

They said blending more than 10 percent ethanol into gasoline would produce a fuel dangerous for old vehicles and instead purchased RINs to offset their obligations.

RIN prices for 2013 soared to over $1.45 last year, a stark contrast to the 5 cents each they commonly traded at the previous year.

The U.S. Environmental Protection Agency, which oversees the RFS, said in November it would cut blending requirements for 2014. That sent RIN prices down but they have still not returned to lows seen in 2012. (Reporting By Cezary Podkul and Robert Gibbons, Writing by Sabina Zawadzki; Editing by Andre Grenon, Meredith Mazzilli and David Gregorio)

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