Full standard deviation higher for gasoil, which is up $50/mt since the end of year settlement. The announcement of sanctions on the Russian dark fleet by the US and EU will cause some serious trouble to the steady flows of diesel from India; hence, the strength of ICE gasoil today. Reminds me a bit of the Russian Baltic sanctions at the end of 2022 that disrupted deliveries of ULSD into Europe when prices were $918/mt and then proceeded down $218/mt by May 23 to $700/mt where we are approximately, but then heat-crack margins were in the $40/brl, and now we are back to $28/brl. With such heat-crack margins, we can expect a solution to be found, but in the meantime, Europe will face higher diesel prices! Flat price biodiesel (FAME0) is up $73/mt to $1190/mt, and RME is up $78/mt to $1282/mt in ARAG, while UCOME is up $31/mt to $1389/mt, telling us different stories. Bio will be needed as an extension to gasoil supplies for now. Gross margin for RME is a healthy $118/mt for a vertically integrated producer, while F0 gross margin is $88/mt, and UCOME gross margin has now improved to $229/mt. Now remember that these gross margins do not include operating costs (especially the cost of power in Europe) and/or yield loss for feedstocks like UCO. WASDE report today was a bit bullish across the board on crop size adjustments but nothing terribly significant. Rumored 45z guidance release today was a bust as Treasury just kicked the can down the road to Apr 10 at the very least while offering guidance on partially processed imports, killing large deals made with South Korea on the west coast. The guidance on imported UCO is still up in the air until the GREET model is finalized. Since this model is the basis on which one calculates Carbon Intensity for 45z, this leaves many producers in no-man's land unless you want to punt. Finally, many producers will choose to avoid crop-based oils and imported UCO until further clarification is made on GREET by the Department of Energy and Treasury - Q2 earliest.
Comments