[RE]fuel Market Report Commentary

RTFCs showed signs of shrugging off the winter quiet spell, as buying interest picked up and Year 10 sellers "pounced".

Trading sources put volume trading at 40-50 million certificates changing hands with trading levels focused on 15.3p, the level at which the Year 10 certificates were assessed.

Year 11 interest remained more standoffish, with buyers eliciting little interest from sellers who are increasingly focussing on the landscape beyond the RTFO reboot, due in April 2018.

As such, a Year 10-Year 11 swap at .6 p was heard unfilled, leaving the Year 11 certificate moving up at a slightly faster rate than its Year 10 stablemate, to be assessed at 16 p.

Supporting the burst of activity was the headroom afforded by weaker diesel prices, although Friday saw a flurry of support push diesel prices up by around $15/mt, week-on-week to hit $566/mt at 16:00 London time, having hovered around $550/mt for the four preceding days.

As diesel prices have softened, so FAME 0 and RME premiums have recovered to ease the theoretical cap on certificates and allow headspace for prices to move into.

“Biodiesels have gone up; when the market was all down, down, down through December and early January, no one was really willing to buy. Then it hit bottom, bounced a little, and frustrated buyers who had been waiting jumped in,” one trading source said of the activity.

The industry appears to be increasingly confident that the legislative changes that need to be made to the RTFO will be in place on time, despite parliament being in recess this week and the first potential date for the changes to be discussed expected to be February 26.

Against that dynamic, the value of the RTFC versus the fixed-rate Renewable Heat Incentive showed its first increase since the end of October, with the Year 10 RTFC equating to a 1.18p premium on a kilowatt hour basis.