UK Renewable Transport Fuels Obligation (RTFO) market outlook

Compliance tickets prices start making small gains

Prices made tiny gains in the UK Renewable Transport Fuels Obligation (RTFO) market, as a small number of trades were reported against a backdrop of relatively strong biodiesel prices.

By the time of publishing on Friday 27 May, Fastmarkets EnergyCensus had heard of two trades for 2022 RTFCs; both carried out earlier on in the week at 40.75p.

“The market continues to be quite volatile,” one trader told Fastmarkets EnergyCensus.

Fastmarkets’ price assessments for 2022 RTFC compliance tickets have therefore moved up by a quarter of a penny from last week’s levels to 40.75p.

Meanwhile, demand for the 2021 ticket vintage remained lackluster, with no interest reported by trading sources.

Last week, reports that a seller had offered 2021 tickets at levels which 2022 tickets had also traded at “didn’t go anywhere [in terms of trade],” a source said.

He added that this dynamic implies there is a differential between the two” and that between 0.75 of a penny and 1p could be “reasonable spread for the two vintages.”

Fastmarkets EnergyCensus has therefore assessed the value of RTFCs for 2021 at 40p, compared with 39.75p last week.

On the physical market, prices remained relatively strong for biodiesel despite some dips for used cooking oil methyl ester (UCOME) and fatty acid methyl ester (FAME).

Rapeseed methyl ester (RME) made week-on-week gains of $25 per tonne, rising to $1,130 per tonne.

Meanwhile, FAME, which traders told Fastmarkets EnergyCensus had been sold down this week, fell to $759.50 per tonne from $815 per tonne a week earlier.

UCOME also shed $58.50 per tonne to reach $1,192 per tonne, but trading sources said demand for the product remained healthy.

“We’re seeing good demand for UCOME overall in June, and it will remain strong,” a trader added.

Late last week, biodiesel prices were spurred by a statement from Indonesia’s government, which detailed that the southeastern Asian country would restrict exports of UCO along with crude palm oil and other palm oil products.

However, traders told Fastmarkets EnergyCensus that this news had no longer been at the forefront of considerations this week amid ongoing confusion about the extent to which waste-based feedstocks would be included in the government’s curbs on exports.

Last week biodiesel prices were volatile on expectations that demand for waste-based biodiesel in Germany would rise to make up some of the shortfall anticipated from a potential 2.5% cap on crop-based biofuels in 2022 - a big decrease from the 4.4% share expected this year.

That same government proposal also laid plans to reduce the threshold down to zero by 2030 and slow the country’s planned increases in GHG reduction requirements for fuel supply.

“These reports from Germany seem to have been pushed to the side, and now everyone is just waiting to see what the country decides to do,” a source told Fastmarkets EnergyCensus.

“No one else has declared changes to their mandate [in the past week], so there really is not much change politically - these are just normal market movements now,” the source added.

Brent crude oil on Friday stood at over $114 per barrel, up from $112 per barrel a week earlier, while gasoil ended the week at $1,162 per tonne, up over $90 week-on-week.

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