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Bloomberg
Shares of US refiners pared gains after President Donald Trump’s administration denied that it was considering a proposal to change biofuel blending rules. Billionaire investor Carl Icahn and the leading US biofuel trade group struck a deal to revamp a law that mandates oil refiners to either blend petroleum-based fuels with ethanol and biodiesel, or buy blending credits called RINs, according to people familiar with the agreement, and the shares rose earlier in the day on the news.
Merchant refiners including Icahn’s CVR Refining and Valero Energy Corp. would benefit from a deal. Gasoline blenders that operate fuel stations such as Casey’s General Stores Inc. and Murphy USA Inc. would have to shoulder the costs.
Ethanol blending credits for 2017 compliance fell by nearly 35 percent Tuesday to 30 cents each, the lowest on record for the contract. The credits rebounded to 45 cents after the White House comments. Gasoline margins have moved in sympathy with RINs in the months since Trump’s election. That’s because the majority of US refiners have exposure to their RIN obligation, according to Barclays analyst Paul Cheng.
“The RIN prices are at least partially reflected,†Cheng said from New York. While refining margins narrowed early on RINs’ weakness, refiners that have lobbied to change the Renewable Fuel Standard’s obligation point spiked in overnight trade. CVR Refining, which spent $205.9 million on RINs in 2016, rose as much as 6.9 percent and settled with a gain of 1.4 percent. Valero rose as much as 3.2 percent and ended the day up 1.1 percent. Murphy fell 6.1 percent and Casey’s 2.7 percent.
Icahn and other merchant refiners, or refiners that don’t own retail gas stations, urged lawmakers to shift the burden of compliance to fuel blenders. This week the Renewable Fuels Association, which previously opposed the move, agreed to support the refiners in exchange for a pledge for a gasoline waiver that would allow for 15 percent ethanol blends year-round.