[RE]fuel Market Report Commentary

Another week in which activity for UK RTFCs bordered on the theoretical rather than the actual, as Year 10 certificates remained on the shelf while Year 11 at least generated some buying and selling price information.

Energy Census assessed Year 10 up modestly to 15.1 p/certificate, largely on the back of a slight improvement in FAME 0 and UCOME values which saw physical premiums regain some ground and lift the theoretical cap slightly higher.

The exception was RME, where premiums face pressure as the market comes out of its cold weather properties – a move that typically negates RME’s superior cloud points and sees it priced more competitively with FAME 0.

But a lack of real trading activity continues to suggest that much of the Year 10 activity has already been put to bed as the year end approaches.

For Year 11, offers were patchy, but market sources quoted bid levels of around 16 p/certificate, with offers heard as far apart as 16.5 p to 18 p/certificate, although one trading source saw a pragmatic consideration stunting trading activity, as the UK moves to a higher blend mandate from April.

"Nobody wants to sell Year 11; they’re holding on to see where it goes next," the source said, with the industry facing something of a crunch with the step up from 4.75% to 7.25% and higher thereafter.

"I think [production] will barely meet the requirement; people will be forced to blend to meet their own mandates… If you have to meet a mandate of 9.75% there’s no way you can blend and trade certificates," the source said.

The UK is scheduled to hit 9.75% sustainable fuels by 2020.

Elsewhere, the UCOME market has taken the upcoming increase in its stride, with the UK’s anticipated increase doing little to lift the gloom for traders in the Amsterdam-Rotterdam-Antwerp trading hub.

Stock levels remain high and prices under pressure, according to a second source.

"There’s lots of stuff in tank; I don’t see anybody excited about it – its pricing lower and difficult at the moment to sell UCOME," a broker said, with abundant SME and worries about Indonesia’s palm volumes contributing to the gloom.

"We’re looking at second half March and April, and no one seems to be excited at all."