Week 48: Navigating Uncertainty in the Biodiesel Market

Political Noise and Market Dynamics

Week 48 opens with the biodiesel market dominated by political noise and macro uncertainty rather than fundamentals. Last week, a Reuters leak hinted that the EPA might delay or dilute its June proposal to reduce incentives for imported biofuels. Although the EPA responded with an unusually forceful rebuttal—calling the report misleading and insisting nothing has changed—its defensive tone only reinforced traders’ suspicions that internal disagreements persist.

With the final RFS rule still pending and Washington signaling inconsistency, biodiesel players enter the week cautiously. They treat every EPA headline as a source of risk rather than clarity.

Market Overview

ARAG opens softer across the board. RME begins the week in the €725–€735/mt FOB ARA range. This is weighed down by ample rapeseed oil and a lack of meaningful support from the diesel curve. FAME 0 starts the week in the +$560s–$570s over ICE gasoil, reflecting both slow discretionary blending and persistent pressure from soft vegoil markets.

UCOME retains its premium around $770–$785/mt, but liquidity is thin as buyers hold back. HVO Class II remains elevated near flat price $2,450–$2,500/mt, driven more by structural SAF tightness than diesel economics. Refiners show little appetite to commit ahead of the U.S. holiday. Across ARAG, the tone is defensive and volume light. Most counterparties are unwilling to add front-end exposure while policy signals remain muddy.

Oilseed Fundamentals

Oilseed fundamentals add to the bearish tone. The latest USDA projections confirm that global oilseed production will hit a record 688 million tonnes in 2025/26. This growth is driven almost entirely by non-soybean crops such as rapeseed, sunflower seed, and palm kernel.

• Rapeseed is forecast to reach an all-time high above 92 million tonnes.

• Sunflower seed approaches 54 million tonnes.

• Palm kernel expands toward 21 million tonnes.

  
  

Soybeans—the most biodiesel-sensitive oilseed—are the only crop in decline at 422 million tonnes, down 1.3% year-on-year. With China’s crush demand sluggish and Brazilian offers materially cheaper than U.S. values, vegoils enter the week heavy. They offer no support to biodiesel premiums.

Geopolitical Factors

Macro markets are now responding to a new, potentially decisive variable: traction behind a 28-point peace framework for the Russia–Ukraine conflict. This proposal bundles a $100 billion pool of frozen Russian assets with a broad mutual amnesty mechanism. It has gained more momentum than prior diplomatic attempts.

With diesel crack margins at record highs, even partial progress toward a settlement could trigger a sharp re-pricing. Traders estimate a $10–$20/bbl collapse in cracks is entirely plausible. Crude flat price is likely to fall in tandem, regardless of how backwardation responds.

For traders, this means no one will buy the front end at current premiums as long as this peace plan remains a live scenario. The risk of an abrupt unwind hangs over all distillate-linked products—including biodiesel.

Legislative Landscape

Washington remains central as the week begins. Clean Fuels Alliance members carried out 94 congressional meetings before Thanksgiving. They pressed the EPA and Treasury to finalize the 2026–27 RFS and issue long-delayed §45Z guidance.

Meanwhile, the SAF landscape saw the launch of a new benchmark: Argus unveiled the world’s first modeled eSAF indexes. These indexes show production costs more than 13× conventional jet fuel and 3.5× the cost of HEFA-SPK SAF (Argus eSAF launch).

With gasoil steady around $710–$713/mt, vegoils trending soft, D4 RINs stable in the 1.03–1.04 range, and the peace narrative hanging over cracks, Week 48 opens with biodiesel markets hesitant, risk-aware, and reluctant to take direction until Washington and geopolitics offer a clearer path.

Conclusion

In conclusion, the current state of the biodiesel market reflects a complex interplay of political, economic, and legislative factors. As we navigate these uncertain waters, it is crucial to stay informed and adaptable. The landscape may shift rapidly, and being prepared for changes can help us optimize our operations.

For those looking to stay ahead, understanding the implications of these developments is key. The biodiesel industry is at a crossroads, and the decisions made in the coming weeks will have lasting impacts.

As we move forward, I encourage you to engage with the latest insights and strategies to ensure your business remains competitive in this evolving market.