Liquidity dipped in California’s LCFS market on Thursday as traders opted to keep to the sidelines, with some participants absent. Bids pedalled back to $77 with a Q4 transfer offer repeated from Wednesday at $81.50, pulling assessed value for PRIMA’s LCFS Index down $1.50 to $79.25 by the close of business.
While the quadrupling in LCFS prices since June continues to offer a stronger lure for low-CI biodiesel than most rival biofuels, Midwest producers are holding back on making fresh production decisions until they get a better feel for the likelihood that the federal $1/gal blenders’ credit will be reinstated. The return of the credit will likely lure idled plants back into operation. A 13c/gal drop in heating oil prices to less than 1.50/gal has further hurt biodiesel production economics for already operational facilities. While Argentina’s prompt biodiesel arbitrage to the US has remained shut so far this month on paper, three large importers have still lined up 14.05mn gal of Argentinian product to ship to the US in October.
The LCFS program meanwhile is still carrying a 5.4mn t ticket surplus hanging over from the scheme’s inception into the first half of this year, with some traders skeptical that the overhang will maintain positive over the next years.