California’s LCFS credit market maintained its strong form on Wednesday, with Q4 transfer credits trading at $99 and $100. Q1 transfer credits meanwhile changed hands at $99.50, keeping the market structure flat into the first half of next year. In total almost 20,000t of credits have been confirmed trading already this week. The deals left the market best offered at $105 by the close of business, against bids ranging between $95-97. PRIMA’s LCFS Index finished Wednesday at $100.
The bullish mood in the market is being primarily driven by manoeuvring ahead of next year’s more stringent CI reduction targets, which will steepen further through to 2020 as part of the state’s “hockey stick” implementation plan. Strong west coast fuel demand meanwhile is increasing the volume of low carbon blendstock which fuel suppliers will need to source in order to meet higher CI reduction ratios. In the year-to-date through September, miles driven in California have surged 4.4% to 230bn miles. California reformulated gasoline output meanwhile has risen to 6.7mn bl/week, beating the yearly 2015 average of 6.5mn bl by 3%. In-state diesel production has also increased steadily since August 2015, with total production of on-road diesel recently averaging 2.7mn bl/week of production, beating the year-to-date production average of 2.5mn bl/week. Movements of motor fuel across the state border surged in the first half of this year, with May and June imports hitting five year highs after Exxon closed its Torrance refinery.