Traders See RIN Relief but Flag Downside Risk for Soybean Oil as EPA Nears 2026 Biofuel Decision
Clarity on apparent 2026 biofuel quotas eases RIN compliance fears, but traders warn softer diesel targets and restored import credits could pressure soybean oil demand
Fuel and ag traders broadly welcomed signs that the Trump administration is moving toward finalizing 2026 biofuel blending quotas by early March, but market reaction has been mixed — with some warning the proposed changes could ultimately prove bearish for soybean oil if renewable fuel credit values weaken further.
According to traders and analysts, the plan outlined to industry by the Environmental Protection Agency — and reported by Reuters — reduces regulatory uncertainty that has hung over the Renewable Fuel Standard (RFS) market for much of the past year. But it also removes a key bullish pillar that oilseed markets had been leaning on.
RIN markets cheer clarity, lower compliance risk
Traders said the apparent decision to drop penalties on imported renewable fuels and feedstocks is being interpreted as a clear positive for refiners and RIN markets. By abandoning the proposed cut to credits for foreign supply, the EPA reduces the risk of a sudden tightening in available compliance gallons — a scenario that had threatened to drive D4 and D6 RIN prices sharply higher.
“This takes a tail-risk event off the table for refiners,” one RIN trader said. “You still get higher headline blending targets, but without a supply shock from cutting off imports.”
RIN prices were already under pressure in recent weeks amid expectations that EPA would soften its stance, and traders said the latest signals reinforce a bearish-to-neutral outlook for RINs heading into the first quarter.
Bio-based diesel volumes: still high, but possibly capped
While total biofuel volumes remain elevated under the proposal, traders focused on the EPA’s consideration of lowering the 2026 bio-based diesel mandate to a range of 5.2–5.6 billion gallons, down slightly from the originally proposed 5.61 billion gallons. (Note: EPA is now doing biodiesel in billion RINs not gallons. Reuters put the conversion in there for perspective.)
That adjustment, traders say, reflects a balancing act by the Trump administration — maintaining support for farm-state interests while avoiding fuel price volatility ahead of the midterm elections.
“The mandate is still historically strong,” one renewable fuels analyst noted. “But the direction of travel matters more than the absolute number, and this signals caution rather than acceleration.”
Soybean oil loses a policy tailwind
For agricultural markets, the most pointed reaction came from soybean oil traders, some of whom said the combination of lower bio-based diesel volumes and cheaper imported feedstocks could undercut demand expectations.
“If imports are fully credit-eligible again, domestic soybean oil loses part of its premium,” one oilseed trader said. “That’s why some desks are calling this bearish for soyoil, even if it’s constructive for fuel markets overall.”
Soybean oil futures had benefited in recent months from speculation that EPA would restrict imported renewable diesel feedstocks, effectively forcing greater reliance on domestic oils. The apparent retreat from that approach removes a key bullish assumption embedded in prices.
Small refinery exemptions remain the wild card
Traders cautioned that one major uncertainty remains unresolved: whether EPA will require refiners to reallocate exempted gallons tied to the agency’s small refinery exemption (SRE) program.
Market participants said a decision to require only partial reallocation — such as the 50% option previously floated — would further limit upside for RINs and renewable feedstocks, while full reallocation could quickly reverse sentiment.
