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Backwardation returns in both gasoil and especially bean oil

Updated: Jan 4, 2023


Inverse in Jan/May Bean oil is up 272% since Dec 5 while in Gasoil Jan/May is up 87% ...hmmmmm. Bean oil as coefficient has barely moved from 1.53 to 1.63 telling us that fundamentals have not changed on the front but expectations for next year have changed significantly. We see this in Bean oil Mar options that show significant volume in and above the 68 strike area that is pulling Soybean oil higher. FAME in Europe is trading at $40/mt below BOGO confirming that front of curve remains bearish while premiums are in a $20-30/mt contango through May for both FAME and UCOME. RINs have recovered a bit up 4.5% but still at only 1.62. What is significant on the physical side is that Sunflower oil in Europe is trading at $30/mt below Soyoil while Argentina FOB premiums recovered a bit this week to -650 after trading at -870 and -900 last week. Don't think that cash premium recovery is sustainable despite concerns about dryness. SouthAmerica is growing a monster crop! Watch the end of year omnibus bill for BTC and other Xmas effects yet division in Congress is great and anything can happen. Volatility in bean oil options remains very low ... barely under 30% while Gasoil is 58%... yet backwardation in bean oil is simply not sustainable at current levels. Merry Christmas and Happy Hannukah!

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