Biodiesel Squeezed Between Heavy Gasoil and Record Soy Supply

Front-month ICE gasoil continues to unravel, with the Dec/Apr spread collapsing to +20/mt and even the less expiry-distorted Dec/Jul narrowing to +31.75/mt. The unwind on the GASZ25–GASJ26 structure shows the market retreating sharply from the tightness seen earlier in the autumn, setting a weak tone across the entire biodiesel complex.

In Northwest Europe, ARAG barge trading was decent today, but all flat-price indications settled below their respective monthly averages. The pressure from gasoil decisively outweighed any support from feedstock curves, and physical buyers remain reluctant to pay above the prevailing monthly mean. The softness aligns with what is happening globally in middle distillates, as Asian gasoil margins continue to ease and prompt backwardation narrows further.

Palm oil remains the only vegoil consistently holding above $1,000 into April. Malaysian futures softened slightly on weaker rival soyoil, but forward physical values through Q2 continue to clear above the four-digit threshold, maintaining palm’s premium cost structure relative to other biodiesel pathways. POGO reflects this dynamic, with the H26 value around +369/mt, sitting just under Indonesia’s export-levy incentive band. The recent downward drift suggests tightening economics for discretionary blending.

UCO fundamentals remain muted despite news that Singapore-based Just Oil, which also operates under the Tropical Oil brokerage umbrella, plans to acquire a Jiangsu China UCO company. Market participants view this as a trading-oriented expansion of supply-chain access rather than a sign of rising end-user demand, consistent with the company’s established aggregation role within the regional waste-oil market.

The USDA report today underscored the scale of global supply building into early 2026. Brazil at 175 MMT and Argentina at 48.5 MMT total 223.5 MMT, and once Paraguay and Uruguay are included, the full South American soybean crop could approach 240 MMT. Global soybean ending stocks of 122 MMT amount to the size of a full Brazilian crop from only a few years ago. With South American weather still non-threatening, vegetable-oil markets continue to face a heavy supply backdrop.

Overall, biodiesel remains caught between a weakening diesel complex and an increasingly burdensome global oilseed balance. Until ICE gasoil finds a firmer floor after the December expiry on the 11th, the bias across ARAG flat prices and broader biodiesel benchmarks remains tilted toward further pressure.