RTFC offers surge as Ukraine-Russia sends biofuel premiums upwards

Quantum Commodity Intelligence - UK Road Transport Fuel Certificate offers were surging higher Thursday as biofuel prices spiked and brokers advised clients to sit back and wait after the Ukraine-Russia conflict sent energy and agricultural prices rocketing, according to market sources.

An offer for 2022 non-crop RTFCs was heard in the afternoon at 40.75 pence per certificate, up from a prior day assessment of 37p, after a morning of inaction as traders took stock of rising biofuel prices and increased certificate replacement costs.

A trade at 38.75p was also reported but the market had already moved on said sources, with the next traded level hard to call.

"I would not be a seller anywhere... I am lost for words, to be honest," said one source.

"[The market] is going to roof for sure... The next trade could be significantly higher," added a second source.

RTFCs are created by blending renewable fuels into road transport fuels in the UK and then submitted to the government as evidence of meeting its renewable target, which stands at 12.6% by volume in 2022.

Biofuels markets were supported by huge increases in both energy and agricultural prices with paper markets for ethanol and biodiesel surging higher versus underlying diesel and gasoline, lifting physical blending costs.

The premium over low sulfur gasoil futures for the used cooking oil biodiesel which generally sets the marginal price for RTFCs was heard traded at $1,215/mt for Q2, up $45/mt and sending the theoretical RTFC replacement cost up around 2p on the day.

The gain in biodiesel prices was exacerbated by a rise in the value of the dollar index, making it more expensive in pounds to create RTFCs from physical biodiesel blending.

The move Thursday followed a 3p rise in replacement costs over the preceding week amid the ongoing Ukraine-Russia tensions while RTFC prices had risen only 1.25p over the same period, according to Quantum data.