Houston-ARA B30 diff could spark Houston interest

: Biofuels, Oil products
24/08/09

The Houston to Amsterdam-Rotterdam-Antwerp (ARA) B30 biodiesel for bunkering price differential is narrow enough to generate buying interest in Houston, as environmental regulations tighten in 2025.

B30 biodiesel blends, comprised of 30pc cooking oil methyl ester (Ucome) and 70pc very low-sulphur fuel oil (VLSFO), allow ship operators to lower their greenhouse gas (GHG) emissions and thus lower their CO2 expenses. In May and June, Houston B30 was assessed at a $7-$17/t discount to ARA B30 (see chart). In July, the differential flipped to a $22/t premium, as the US Gulf Ucome price gains outpaced northwest Europe's. But provided that the differential remains narrow, US Gulf coast B30 demand from ocean-going vessels could pick up next year, as EU-led GHG regulations tighten, a trader told Argus.

EU's emissions trading system (ETS) for marine shipping commenced this year and requires that each ship operator pay for 40pc of the GHG generated on 50pc of each voyage starting or ending in the EU. This applies to vessels travelling between the US and EU. In 2025, the EU ETS emissions limit will increase from 40pc to 70pc, and jump up to 100pc in 2026. Starting next year, the EU's FuelEU Maritime regulation will require a 2pc cut in GHG intensity for bunker fuels compared with 2020 base year levels. FuelEU imposes a penalty of €2,400/t ($2,622/t) VLFSO energy equivalent. Similar to the EU ETS, the FuelEU regulation applies to 50pc of the fuel used on voyages between the US and EU.

In addition to tightening EU-led regulations, US biodiesel for bunkering demand could be boosted if the US allows for subsidies for biodiesel sold to ocean-going vessels. Currently, ocean-going ship operators cannot take advantage of the same subsidies that are given to biodiesel blended for use for US road transportation. In February, a bipartisan "Renewable Fuel for Ocean-Going Vessels Act", was introduced in the US Senate, a companion to a prior bill introduced in the US House of Representatives in October 2023. The bills have not progressed to the Senate or the House. If they pass, Houston B30 biodiesel for bunkering would become more price competitive than ARA B30.

By Stefka Wechsler

B30 biodiesel (Ucome + VLSFO) $/t

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24/12/20

Shell and Prax call off deal on German refinery stake

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Viewpoint: EU, UK mandates will drive global SAF demand

24/12/20

Viewpoint: EU, UK mandates will drive global SAF demand

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Trump backs new deal to avoid shutdown: Update

24/12/19

Trump backs new deal to avoid shutdown: Update

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US Congress passes waterways bill

24/12/19

US Congress passes waterways bill

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Viewpoint: Politics, economy key to bitumen recovery

24/12/19

Viewpoint: Politics, economy key to bitumen recovery

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