U.S. renewable fuel credits surge after lawsuit

By Stephanie Kelly

NEW YORK, Jan 5 (Reuters) - U.S. renewable fuel credits surged on Tuesday after Valero Marketing and Supply Company filed a lawsuit alleging that a commodity group failed to deliver them credits needed to prove compliance with U.S. biofuel blending mandates, traders said.

Market participants bought up the credits on Tuesday on concerns that companies would be short the compliance credits and would have to buy in the market, traders said. That boosted renewable fuel (D6) credits by 13% from the previous session and biomass-based (D4) credits by 8%.

D6 credits <RIN-D6-US> traded at 90 cents each on Tuesday, the highest since November 2017, while D4 credits <RIN-D4-US> traded at $1.12 each, their highest since August 2017.

Valero, a Texas-based energy company and refiner, alleged Sundive Commodity Group failed in September, October and November to deliver the credits, also called Renewable Identification Numbers, or RINs, after Valero entered into contract with Sundive, according to a court document filed Dec. 31 in a Texas district court.

As a result, Valero said it had go to the market to purchase RINs, paying over $10 million more than it would have had to pay if Sundive delivered the credits on time, according to the document. Valero said Sundive now owes them that amount.

A Sundive representative did not immediately respond to a request for comment.

Under the U.S. Renewable Fuel Standard (RFS), refiners must blend billions of gallons of biofuels into their fuel mix, or buy tradable credits from those that do.

RINs were already on the rise this week because of delayed policy regarding the RFS, as well as higher prices for soybeans, traders said. (Reporting by Stephanie Kelly; Editing by Lincoln Feast.)