Biodiesel/RD: Diesel Still Sets the Price

Friday finished with the strongest scarcity signals still sitting in refined products. August ICE gasoil gained $24.25/mt, or 2.07%, to $1,197/mt, September rose $27/mt, or 2.43%, to $1,138.50/mt, and December gained $25.75/mt to $1,003.75/mt. August/September backwardation eased only $2.75 to +$58.50/mt, while August/December remained +$193.25/mt. The heating-oil crack closed near $85.72/bbl and the 3:2:1 near $60.04/bbl, both still near the top of their historical ranges. Brent ended Friday at $83.55/bbl and WTI at $78.18/bbl. Weekend satellite work raised the seven-day average Hormuz crude flow to about 5.3 mb/d after additional dark transits were identified. Yet combined Hormuz-Yanbu-ADCOP exports for August 1-7 were still estimated at only 54% of pre-war capacity, leaving roughly 8 mb/d missing. Kpler counted eight confirmed Hormuz crossings on August 7, down 33% day on day, while TankerTrackers identified at least 56 tankers operating without normal digital visibility. Iran’s six conditions for reopening Hormuz also overlap substantially with provisions already contained in the June MOU, while reported vessel attacks show physical risk has not disappeared. For Monday, the cleanest test is flow. A move toward 7 to 8 mb/d without further vessel incidents would give traders a numerical reason to test the +$58.50/mt front gasoil backwardation lower. Flows remaining near 5.3 mb/d would leave the physical constraint largely unchanged.

European biodiesel paper softened Friday, but the stronger fossil leg absorbed a large part of the move and Rhine logistics now add a second European pricing layer. Week 31 paper volume finished at 466.3kt versus 632.3kt in Week 30, down 26.3%. HVO Class 2 represented 210.3kt, or 45.1% of weekly volume, followed by FAME0 at 106.5kt, RME at 104.5kt and UCOME at 45kt. FAME August finished around +$382/mt versus +$420 previously, UCOME September around +$530 versus +$585, UCOME Q4 around +$545 versus +$570 and RME October around +$470 versus +$480. Premiums therefore fell $10-55/mt while nearby gasoil gained $24-29/mt. The more important physical development for Monday is Kaub. The Rhine gauge is around 20 cm, versus a 77 cm economic threshold, with standard fuel barges carrying roughly 10% of normal capacity or unable to transit. Rotterdam-to-Karlsruhe fuel freight has risen from about €45/mt in late June to €150-160/mt, an increase of 230-255%, while Monday’s official Kaub forecast is only 16-20 cm and falls toward 8-9 cm by Thursday. This does not necessarily lift all ARA biodiesel values because biofuels face the same transport constraint, but it should widen the distinction between ARA paper and delivered inland Germany or Switzerland. For traders, the European market increasingly needs to be read as two markets, hub pricing and inland delivered pricing.

The US biofuel picture looks different. December D4 RINs finished at $2.225, September soybean oil around 68.24 c/lb and August BOGO near +$305.66/mt versus +$408.54/mt Thursday, a $102.88/mt or 25.2% one-day compression. The margin screens showed roughly $1.07/gal for August RD and $1.53/gal for conventional biodiesel. Chicago soybean oil still carries a large US policy component. Using our working estimate of roughly $1,200/mt from 45Z, RINs and LCFS, multiplied by soybean oil’s approximately 40% share of US biofuel feedstock use, gives $480/mt. Comparing this with roughly $375/mt of Indonesian palm policy support leaves about $105/mt. I would treat $105/mt as a cross-check rather than fair value because the 40% represents average usage and Indonesian support does not pass one-for-one into CPO. The physical market still supports the broader argument. Chicago at 68.24 c/lb equates to about $1,504/mt, while Paranaguá basis around 1,280 to 1,500 points under futures puts Brazilian export soybean oil near $1,222 to $1,173/mt. Against CPO around $1,150/mt, the physical soybean-oil premium is only about $23 to $72/mt. That is much closer to the $105/mt policy-adjusted framework than the roughly +$350/mt futures BOPO screen. My point being that Soyoil premium at +350 is equivalent to its the historical premium Soyoil has over Palm oil. September soybean-oil options also show a calmer market. Near-the-money implied volatility sits around 24% to 25% with about 12 days left. Open interest is substantial on both sides, including about 4,148 calls at 70 c/lb, roughly 6,093 puts at 67 c/lb and 4,227 puts at 66 c/lb, while call positioning extends well above spot. Soybean oil therefore carries significant expiry positioning, but far less implied scarcity risk than gasoil.

BOPO

Asia gets the first fundamental test Monday. Q4 CPO ended Friday at $1,186.75/mt, up 0.36%, while Q1 2027 finished at $1,198/mt, up 0.71%. Q4 POGO fell $25.17/mt, or 12.39%, to +$178.04/mt, while Q4 BOPO rose $7.30/mt, or 2.45%, to +$304.91/mt. Monday’s MPOB July production, stocks and exports will therefore set the first vegoil direction. USDA’s Indonesian balance tightened, with 2026/27 production cut from 48.0 to 47.2 million mt, exports reduced from 25.0 to 23.1 million mt, industrial consumption estimated at 17.4 million mt, up 16% year on year, and ending stocks projected at 3.1 million mt, down 28%. I think USDA is overstating industrial consumption - would cut that by 0.5 to 1.0 Mil MT as I think Asia is already entering a recession (you read it here first!). Soybean trade remains large as well. Brazil exported a record 13.4 million mt in July, with around 70% moving to China and a record 4 million mt moving elsewhere. China imported 11.48 million mt in July, only 1.6% below last July, while the US reported another 238,000 mt flash sale of 2026/27 soybeans to China Friday. These numbers fit the physical BOPO calculation. Vegoil demand remains strong, but current trade flows and export basis do not show the same immediate scarcity premium visible in diesel.

For Monday I would focus on four market numbers, Hormuz crude flow versus the revised 5.3 mb/d seven-day average, August ICE gasoil versus $1,197/mt, August BOGO versus +$305.66/mt and D4 RINs versus $2.225. US logistics deserve attention as well because of drought, with all seven monitored Mississippi River barge segments still more than 10% above their 90-day freight averages, including St. Louis at +38.8% and Cincinnati and Lower Ohio both at +46.4%. SAF remains part of the same margin story. Montana Renewables reported Q2 adjusted EBITDA with tax attributes of $26.6 million versus $16.3 million a year earlier, up 63%, while targeting SAF run rates above 80 million gallons by year-end 2026, above 120 million gallons in 2027 and around 200 million gallons by year-end 2028. The strongest divergence going into Monday remains between diesel and feedstocks. Gasoil carries an $85.72/bbl heat crack, a +$58.50/mt front backwardation and upside option IV approaching 80%, while soybean oil sits near 24% to 25% IV and physical Brazilian soybean oil trades only roughly $23 to $72/mt above CPO. For biodiesel and RD traders, the acute tail risk still sits in finished-product availability rather than vegetable-oil supply.

Heat Crack