News

Following progressively higher output of biomass-based diesel in the United States during the first six months of 2016, producers dialed back their yield in July to a three-month low and shrunk the year-on-year increase in monthly output to 5.9% from a double-digit growth rate realized each month during the first half of the year.

Biomass-based diesel production meeting the US Environmental Protection Agency’s requirements in satisfying the Renewable Fuel Standard in July totaled 204.0 million gallons, 11.3 million gallons more than in July 2015, with output for the first seven months of 2016 reaching 1.27 billion gallons, 280.6 million gallons or 28.4% above the production rate for the comparable year-ago period.

An expanding demand mandate under the RFS, which requires an increasing volume of renewable fuels to be used instead of petroleum-based fuel, continues to underpin the biodiesel market and drove the sharp production gains seen so far this year. Biomass-based diesel is one of several renewable categories to satisfy the RFS alongside ethanol and cellulosic and advanced biofuels, with 1.9 billion gallons of biomass-based diesel required this year under the mandate and 2.0 billion gallons in 2017.

The National Biodiesel Board, the trade organization for the US biodiesel industry, indicates the United States used 2.1 billion gallons of biodiesel in 2015.

However, trading activity is stuck in a low drive, with extended term agreements not getting done while only a smattering of deals in the spot market are transacted. The majority of business continues at the rack level, much of which is already blended with ultra-low sulfur diesel fuel at the wholesale distribution point.

Two issues cloud the near-term horizon for US biofuel traders, marketers and producers, which include a lack of demand growth for distillate fuels–ULSD and heating oil, and the end-year expiration of a tax credit paid to blenders of biodiesel.

Data from the US Energy Information Administration shows implied demand for distillate fuel cumulatively in 2016 through August 19 196,000 bpd or 5.0% lower than during the corresponding timeline in 2015, although distillate supplied to market pulled to parity with year ago during the most rece...