Persistent tight availability across California’s spot R99 markets continued to limit prompt liquidity and thus widely prevented price reaction to theoretically supportive renewable diesel supply indicators this month.
Spot head of the pipeline (hop) values effectively stagnated in both northern and southern California in October as a function of scarce availability. Prompt hop R99 in Los Angeles was last discussed from 9¢/USG below regional CARB ULSD + attributes to a 20¢/USG premium to the same basis, although a lack of availability broadly prevented further testing of the market.
The differential of about 5.50¢/USG over the CARB complex marked the highest differential in the Argus price series history, which began in September 2023. The uptick also boosted the cash premium for hop R99 versus regional CARB diesel to an Argus high of nearly 57¢/USG as of 21 October, when outright Los Angeles hop R99 prices closed at $2.83/USG.
Buyers in southern California at times suspected just one seller was behind the limited nearby hop offers, with most said to be earmarking volume instead for existing supply contracts as longer-term supply uncertainty continued to dictate business strategy.
The scheduled sunsetting of the biodiesel tax credit (BTC) at the end of the year was long expected to bolster the fourth quarter import lineup, but a production outage in Singapore will now likely limit remaining shipments. With the BTC slated to give way to the Inflation Reduction Act’s Clean Fuel Production Credit, which will shift financial incentives toward domestic production, the longer-term import landscape was already murky.
Neste halted output of US-spec renewable diesel from its Singapore facility this month after experiencing an equipment failure starting up after a planned third quarter maintenance. The shutdown affects only renewable diesel for the US market, a further constraint on California’s already tight spot R99 market as Neste imports to the US from Singapore averaged an estimated 772,000 bl/month — just under 26,000 b/d — from January-September, according to bills of lading.
But renewable diesel imports to the US west coast are projected to climb in October, surpassing September volume despite earlier expectations for a 2024-low.
Total renewable diesel arrivals to the west coast via vessels from both abroad and the US Gulf coast should reach 1.44mn bl in October, just a nominal dip from September volumes, according to data aggregated from bills of lading and the global trade and analytics firm, Kpler. Volume from the US Gulf coast aboard Jones Act vessels is projected at 575,000 bl, per Kpler. Combined imports from Singapore, Finland and Newfoundland are estimated to reach 865,000 bl — about an 11pc jump from September.
Latest state-level supply data and domestic RIN generation data reflected tightening of regional and national renewable diesel output.
California’s output of "other diesel fuels" — the California Energy Commission (CEC) category including export-grade EPA, high-sulfur and renewable diesel — fell by 43pc to average 85,000 b/d in the week ended 11 October. The production downturn whittled combined inventories of those fuels down by 3.8pc to 1.13mn bl.
Domestic renewable diesel production in September was estimated at 159.9mn USG, about 3.81mn bl, according to D4 RIN generation data from the Environmental Protection Agency. There was scattered expectation among market participants that the volume would be revised higher following its mid-month publication, but current figures reflected about a 21pc drop in domestic renewable diesel production from August.
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