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Rins edge towards mainstream.

A little more light is about to fall on the murky, sometimes messy market for renewable-fuel credits, with the launch of the CME Group's first futures contracts for the government-mandated credits, known as "Rins."

Created by a US programme aimed at boosting the use of renewable fuels such as ethanol in domestic motor fuel, Renewable Identification Numbers (Rins) have until recently been regarded as a somewhat untamed backwater of US energy and agricultural markets, where trading is unregulated and pricing is sometimes hard to peg.

But ethanol Rin values have recently skyrocketed in price and volume has spiked as speculators join oil refiners, gasoline importers and others in a scramble for the credits, which are critical for oil companies to meet US mandates for renewable fuels.

A 20-fold surge in prices this year has roiled Washington as oil industry leaders warn that consumers could get hit with higher gasoline prices if Washington does not step in.

In an effort to capitalise on the market interest, CME Group owner of the world's largest futures exchange, will launch futures contracts for ethanol credits and other renewable fuels allowing users to trade them alongside its benchmark crude and gasoline products. The Intercontinental Exchange launched its own on April 29. "There is a lot of interest building around it," said Dan Brusstar, senior director of energy research for CME Group. "Right now you don't have good transparency. A lot of companies are leery of trading physical Rins. It (futures contracts) will bring some transparency to the market."

But some market experts say many more steps are needed to bring transparency to the $9 billion ethanol credit market.

"It's so new and it's such a volatile market. It is really messy," said Jeff Hove, vice president of RinAlliance, an Iowa-based aggregator and trader of Rin credits.

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Publication:Oil & Gas News
Date:May 20, 2013
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