Bean Oil Looks Tired, But Gasoil Still Has the Match

July bean oil is around 74.22 c/lb, equal to $1,634/mt, while the July bean-oil-to-gasoil ratio slipped to 1.554x, down 0.48% on the day and down 12.65% over three months. September is at 1.574x, down 13.27% over three months, and December is at 1.668x, down 11.99% over the same period. The chart looks technically tired because soybean oil has stopped gaining on gasoil, even with July bean oil still above $1,630/mt.

BOGO and BOHO confirm the same signal. July BOGO is still high at $583/mt, with September at $579/mt and December at $622/mt, but all three were lower on the day. BOHO is also weakening. July BOHO is at 1.9434, down 1.43% on the day and down 6.06% over three months. August is at 1.8932, down 9.24% over three months, while December is at 1.9163, down 10.07% over the same period. On those relationships alone, bean oil looks out of steam.

The problem with a clean bearish interpretation is that July ICE gasoil is still $1,051.25/mt, December is $931.25/mt, and the July/December spread is still +$120.50/mt after trading mostly below +$24/mt before the March spike on the daily chart. July gasoil gained $5.00/mt on the day and December gained $8.75/mt, so the spread narrowed on the day, but it remains historically wide. Heating oil tells the same story, with July at $3.6141/gal, up 24.69% over three months, and September at $3.5461/gal, up 28.97% over three months. A tired bean oil ratio does not remove the distillate risk. It means soybean oil needs a fresh gasoil impulse to extend the move.

The curve is also telling us the market is not pricing a quick end to the war. July/December gasoil is still +$120.50/mt, with July at $1,051.25/mt and December at $931.25/mt, after trading mostly below +$24/mt before the March spike. If the market believed Hormuz disruption was a short-lived event, the back of the curve should be collapsing faster relative to the prompt. Instead, December gasoil is still above $930/mt and the entire distillate curve remains elevated. That tells me the market is pricing a longer war window rather than a short interruption.

Jul/Dec Gasoil

Managed money is also reducing commodity length, which helps explain why the bean oil chart looks heavy even while distillate fundamentals remain tight. In gasoil, money managers cut net-long positions by 1,808 lots, taking the position to the least bullish level in seven weeks, while the long-only total fell to the lowest level in about five months. That tells me part of the recent weakness is not only a biodiesel or vegetable oil signal. It is also a broader fund-positioning move out of commodity length. This matters because managed money liquidation can pressure CBOT bean oil and BOGO in the short term, while the physical gasoil market still shows July gasoil at $1,051.25/mt and July/December at +$120.50/mt.

Europe gives traders a concrete reason to stay alert. The import chart shows diesel/gasoil and jet fuel/kerosene arrivals into the EU and UK falling sharply for a second consecutive month, with the latest bar close to the low end of the 2016 to 2026 range. That matters because Europe is pricing the same market with July gasoil at $1,051.25/mt and July/December gasoil at +$120.50/mt. I do not want to read weak BOGO or weak BOHO as a simple bearish soybean oil signal when Europe’s import cushion is thinner and biodiesel, UCOME and HVO remain part of the distillate balance.

Crude is not giving a clean signal either. WTI July is around $90.93/bbl and Brent July is around $94.21/bbl, but Saudi Arabia cut July Arab Light to Asia to a $9.50/bbl premium over Oman/Dubai from $15.50/bbl in June. That $6.00/bbl cut is a large demand signal from the world’s largest exporter, even while Hormuz disruption remains the main supply risk. China adds to the contradiction. Two refinery projects totaling 500,000 bpd have been delayed because Middle East supply disruption has raised crude costs, while China’s refinery throughput fell to about 13.3 million bpd in April, the lowest since August 2022 and about 69% of capacity.

Product cracks still argue against complacency. Asia’s 92-octane gasoline crack rebounded to $22.64/bbl over Brent, up $3.60 on the day, while the Singapore naphtha crack rose to $51.80/mt, up $21.38. Pertamina is tendering for about 1.6 million barrels of 90-octane gasoline and 900,000 barrels of 92-octane gasoline for mostly June delivery. Those numbers show product demand is still present even as crude demand signals from Asia look softer.

The U.S. biodiesel screen remains supported by the numbers, especially for conventional biodiesel. July RD crush improved to 56.53 c/gal, up 2.81 c/gal on the day, while September improved to 67.86 c/gal and December to 62.88 c/gal. Conventional biodiesel remains much stronger, with July at 106.65 c/gal, September at 115.84 c/gal and December at 109.37 c/gal. The gap between July conventional biodiesel and RD is about 50 c/gal, which again shows why RIN math matter as much as flat feedstock price. Even with bean oil at $1,634/mt, the RFS island still gives conventional biodiesel a much better screen than RD.

D4 RINs

Global vegetable oil does not show a physical shortage in metric tons. CPO into India traded around $1,230/mt CFR west coast, while soybean oil traded at $1,260 to $1,265/mt CFR WCI for August to September. That leaves India soybean oil only about $30 to $35/mt over palm. Against that, U.S. July bean oil is still around 74.22 c/lb, equal to $1,634/mt. The spread between U.S. bean oil and CFR India soybean oil is therefore roughly $369 to $374/mt. That is not a global soybean oil shortage. It is the U.S. RFS island effect.

Brazil export values show the same point. FOB Paranaguá soybean oil basis has strengthened, with July indications improving toward -2000 from -2200 and August to September improving toward -1850 from -2100. At the previous -2200 level, FOB Paranaguá was around $1,590/mt, still below U.S. July bean oil near $1,634/mt. The point is not that Brazil is distressed. The point is that CBOT bean oil is pricing a U.S. RFS-qualified feedstock island, while CFR India swap values and FOB Paranaguá values remain lower in metric tons.

Indonesia adds 2027 optionality, but nearby spreads do not show an immediate squeeze. The new export framework requires palm exporters to report export activity through a state-appointed firm from June 1, while the full shift to state-firm export control starts January 1, 2027. The affected products include CPO, RBD palm oil, RBD palm olein and palm oil residues. Spot POGO is negative at about -$22/mt, while July is $115/mt, September is $173/mt and December is $261/mt. Those values show risk is further down the curve rather than in the nearby market.

Brazil’s farmer economics are a forward supply issue, not a spot soybean oil solution. Farmer selling has slowed, with old-crop soybeans 64.7% sold versus 71.3% at the same week last year, while new crop is only 9.2% sold. Fertilizer is the larger forward risk. Brazil had purchased about 50% of 2026/27 fertilizer needs by late May versus more than 60% normally, while about one-third of world fertilizer flows have been caught inside the Strait of Hormuz since the war began. This matters for 2026/27 soybean supply, but it does not solve today’s U.S. bean oil premium above $1,630/mt.

Europe’s physical bio window stayed active. Today’s report shows RME traded at a $489/mt premium, with gasoil at $1,056/mt and a flat RME price near $1,545/mt. FAME0 averaged $400.57/mt over gasoil, giving a flat price near $1,457/mt. UCOME averaged $521.44/mt over gasoil, giving a flat price near $1,577/mt. HVO Class II traded at a $1,335/m3 premium, with the report showing a flat price near $2,856/mt. The monthly averages are now $1,564/mt for RME, $1,491/mt for FAME0 and $1,622/mt for UCOME, while the monthly HVO and SAF flat price averages are $2,743/mt for HVO I, $2,820/mt for HVO II, $3,237/mt for HVO IV and $2,921/mt for SAF.

The European paper market also regained depth last week. Total paper volume across RME, FAME0, UCOME and HVO2 rose to about 640,500 mt in Week 22 from 495,000 mt in Week 21. The recovery was led by RME, up to 170,000 mt from 69,500 mt, and HVO2, up to 108,000 mt from only 23,000 mt. UCOME cooled to 159,500 mt from 225,000 mt, while FAME0 stayed strong at 203,000 mt. I attach the five-week paper chart occasionally because it shows whether Europe’s bio market is expanding or narrowing beneath the daily window prints. Today it argues for a market still trading actively, even as feedstock spreads and distillate ratios look stretched.

European Bio Paper Trades

SAF remains more policy story than spot feedstock driver, and the IATA production number deserves scrutiny. IATA expects global SAF production to reach about 2.4 million mt in 2026, equal to only 0.8% of aviation fuel use, at a cost to airlines of $4.3 billion. My issue is the math. Europe’s 2% mandate alone implies roughly 1.5 million mt per year based on European jet fuel use. If airlines flying into Europe must meet 50% of the mandate, that adds roughly another 500,000 mt worldwide, taking the mandate-related requirement toward 2.0 million mt. The U.S. SAF volume is still extremely small, likely below 100,000 mt. That makes the IATA 2.4 million mt global production estimate difficult to reconcile unless production growth outside the U.S. and Europe is much larger than current visible trade flows suggest.

The timing problem is also getting tighter. Europe moves from a 2% SAF mandate to 6% in 2030, which means the European requirement alone triples in less than four years. Based on the same jet fuel use, that moves Europe from roughly 1.5 million mt per year today toward about 4.5 million mt per year by 2030 before including any long-haul uplift or non-European airline obligations. That is not a distant target. It is the next investment cycle, and the current market is still struggling to reconcile a 2026 global production estimate of only 2.4 million mt.

The bigger issue for airlines is no longer only SAF availability. It is jet fuel affordability. U.S. airline fuel cost has moved from $2.31/gal before the Iran war to $4.11/gal by April 2026, a rise of $1.80/gal, or about 78%. Adding SAF premiums on top of that fuel shock creates a demand-destruction risk for airlines. This is why mandates ahead of physical supply and cost absorption are dangerous. They do not create affordable SAF. They transfer a higher fuel bill to airlines at the exact moment jet fuel has already nearly doubled from the pre-war level.

There is also an economic optimization calculation inside the airline hedge book. The May 1 to September 30 period is the high tide for airline demand, so airlines with forward fuel hedges have a strong incentive to protect margins by cutting weaker flights, preserving capacity discipline and realizing hedge gains where possible. That may support reported profits during the summer peak, but it shifts part of the burden to customers through fewer seats, higher fares and reduced route availability. The bigger risk comes in the fourth quarter. If many airlines are hedged through September and Hormuz disruption lasts beyond that point, the hedge protection rolls off after the peak travel season, leaving airlines more exposed to spot jet fuel, SAF compliance costs and weaker off-season demand. At $4.11/gal for U.S. airline fuel in April versus $2.31/gal before the Iran war, the fourth-quarter exposure is the issue traders should watch.

My read is that bean oil is tired, but the bear case is not clean. The ratio to gasoil, BOGO and BOHO all say soybean oil has run ahead of itself, with July bean oil-to-gasoil down 12.65% over three months, July BOHO down 6.06% over three months and July BOGO lower on the day at $583/mt. Managed money liquidation adds short-term pressure, with gasoil net length down 1,808 lots to the least bullish level in seven weeks and long-only length at a five-month low. At the same time, gasoil is still above $1,050/mt, July/December gasoil is still +$120.50/mt, Europe’s distillate arrivals are near the low end of the 2016 to 2026 range, Asia gasoline cracks are still $22.64/bbl, U.S. airline fuel cost is $4.11/gal versus $2.31/gal before the Iran war, and conventional biodiesel crush is still above 100 c/gal. I would not chase bean oil higher on its own chart here. I would also be careful being structurally short bean oil while distillate remains this backwardated. The next leg likely comes from gasoil, not from palm or meal.