Nov 21 / Victor Arduin

Energy Weekly Report - 2023 11 20

  Back to main blog page
"Since July of this year, a significant decline has been observed in the BO-HO relationship, reflecting market fundamentals in both the agricultural and energy complex."

RIN prices collapse in 2H 2023

  • Remarkably, the RINs market has witnessed considerable volatility in recent months, largely reflecting the lower costs of soybean oil and the increased production of renewable diesel.
  • One of the main effects of the increased supply of soybean is a reduction in BO-HO margins, which results in lower RIN prices.
  • Furthermore, the US production capacity for renewable diesel in 2023 is expected to surpass biodiesel production capacity for the first time.


The Renewable Identification Numbers (RINs) market has experienced a significant downturn in 2023's second semester, with D4 dropping more than 50% year-to-date.

This decline is attributed to a narrowing of the BO-HO spread, the price differential between soybean oil and blendstock heating oil, and a surge in renewable diesel production.

Furthermore, renewable diesel production in the U.S. has grown substantially in recent years, boosting the supply of RINs in the market, as it generates more credits than biodiesels.

Image 1: Biomass-based diesel and ethanol RIN Prices (RIN/USG)

Source: Refinitiv

Image 2: Seasonal biomass-based diesel US (RIN/USG)

Source: Refinitiv

BOHO margins have shrunk considerably in recent months

One of the most important indicators for the biodiesel industry is the BO-HO spread, a measure that represents the costs and margins for producing biofuels and renewable fuels.

The greater the spread, the higher the cost of producing biodiesel from soybean oil, which consequently increases the price of RINs. Conversely, a smaller spread due to the low values of soybean oil makes RINs cheaper. Current market reflects the latter.

Since July of this year, a significant decline has been observed in the BO-HO relationship, reflecting market fundamentals in both the agricultural and energy complex.

Image 3: Front-month Soybean and Heating Oil Prices (Gal/USD)

Source: Refinitiv

One reason is the expectation of record soybean oil production in Brazil's current crop (2023/24). The greater availability of the product results in downward pressure on its prices, as shown in the chart above. Another reason is that heating oil prices have fallen with less intensity, reflecting lower stocks in the United States and the resilience of its economy.

Meanwhile, palm oil, a substitute for soybean oil, also experiences higher supply in the market, offering little support for the appreciation of soybean oil. Therefore, in the coming weeks, if heating oil remains resilient, possibly reflecting OPEC measures, there is likely to be a further reduction of the BO-HO spread.

Unprecedented Renewable Diesel Production in the United States

The United States has made significant developments in its renewable diesel sector. In 2023, according to the Energy Information Administration (EIA), the country's production capacity for renewable diesel and other biofuels reached 3 billion gallons per year, surpassing biodiesel production capacity for the first time.

On one hand, this is a significant step in the energy transition. On the other, the production of renewable diesel has also been one of the reasons behind the sharp increase in RINs in the market, as renewable diesel generates 13% more RINs than biodiesel per blended gallon.

Image 5: Monthly Production of Renewable Diesel and Biodiesel (Million Gallons)

Source: Refinitiv

In Summary

It is important to note that the energy complex has faced great volatility. In recent weeks, the cost of oil has dropped significantly, which is a primary expense in middle distillates production such as heating oil.

Strong economic data from the American economy and its low middle distillates inventories keep the market expectations bullish for this refined product. However, a revision of these expectations is possible, especially with growing concerns about China's energy consumption and a potential recession in Europe.

Thus, if there is a decline in heating oil prices, there may be an increase in the BO-HO relationship, which would have a bullish impact on the RINs market. In this context, the repercussions of OPEC's actions, which may be announced on November 26th, will be crucial in determining the price action of petroleum refined products in the coming months.

Weekly Report — Energy

Written by Victor Arduin
Reviewed by Livea Coda


This document has been prepared by hEDGEpoint Global Markets LLC and its affiliates ("HPGM") exclusively for informational and instructional purposes, without the purpose of creating obligations or commitments with third parties, and is not intended to promote an offer, or solicitation of an offer, to sell or buy any securities or investment products. HPGM and its associates expressly disclaim any use of the information contained herein that may result in direct or indirect damage of any kind. If you have any questions that are not resolved in the first instance of contact with the client (, please contact our internal ombudsman channel ( or 0800-878-8408 (for clients in Brazil only).

To access this report, you need to be a subscriber.