Biomass-Based Diesel RINs Follow BOHO Higher

The bean oil/heating oil spread (BOHO), perhaps more commonly referred to as the HOBO spread, bounced higher following three consecutive days of decline.  A declining BOHO spread reflects an improving production outlook, either due to increasing fuel cost, declining feedstock cost, or some combination of the two. A rising BOHO reflects the opposite.  Today, soybean oil costs (feedstock) increased 2.4 percent, or 78 ticks, to 33.31 cents per pound. This was only partially offset by fractionally higher heating oil (fuel cost) values.

The rise in the BOHO spread helped to support RIN values.  The 2020 biodiesel RIN climbed a penny to 80 cents, while the 2021 biodiesel RIN was up 1.5 cents to 74.5 per RIN.  Each gallon of biodiesel generates 1.5 RINs per gallon of production, while renewable diesel, due to its higher energy content, can generate 1.6 or 1.7 RINs per gallon.

A continued unfavorable oil outlook has many refiners looking at renewable diesel (RD) production to help repair margins.  Finish Oil producer Neste has been out front of the herd when it comes to renewable diesel output and due to this production has had better relative margins recently.  With more refiners announcing plans for renewable diesel production the North American landscape is changing rapidly.  Including co-processors, RD production capacity is currently around 545 mmgy in North America.  The recent announcements of expansions are set to push capacity 926 mmgy higher, and new facilities either under construction, or planned, may add another three billion gallons of capacity to the North American market.