BOGO Accelerates, RINs Isolate the U.S., Margins Stay Negative

Macro tone stayed firm as Iran discussions continued this week, yet structure inside the barrel weakened. Brent Apr Dec backwardation widened to about 3 dollars per barrel, up from near flat at the start of the year. This move reflects geopolitical risk pricing. Downstream markets did not confirm. ICE gasoil Feb Jul backwardation compressed to about 30 dollars per metric ton, down from more than 60 dollars per ton at the end of January. Heating oil curves flattened at the same time. Risk remains concentrated in crude rather than refined products.

Outright middle distillate economics remain strong. Heating oil crack margins screen near 36.52 dollars per barrel. This level sits well above long term averages and confirms resilience in middle distillate demand. The weakness sits in structure and feedstocks rather than in cracks.

Asian physical markets support this view. Gasoil 10 ppm spot premiums in Singapore held near 1.3 dollars per barrel for early March loading, while prompt time spreads eased to just above 1 dollar per barrel. Physical Gasoil cracks remained below 20 dollars per barrel. HSFO followed the same pattern. Asia 380 cst HSFO spot differentials held near 14 dollars per ton, while the Feb Mar spread softened toward 17 dollars per ton. HSFO cracks stayed weak near minus 4.5 dollars per barrel versus Brent. VLSFO remained in contango. Bunker markets look stable rather than tight.

Marine fuel demand for biodiesel remains regulatory, not economic. Biodiesel remains materially more expensive than HSFO and VLSFO. Use in bunker pools reflects MARPOL aligned compliance, including IMO 2020 enforcement, EEXI, and CII scoring. Typical blends sit in the low single digits, often B5 to B10, aimed at emissions intensity reporting rather than cost minimization. Strong heat cracks do not translate into incremental biodiesel demand.

Vegetable oil spreads show internal stress rather than broad scarcity. BOPO widened back toward +200 dollars per ton. BOGO accelerated and now trades near 600 dollars per ton. The technical signal matters. The 20 day weighted moving average in BOGO crossed above the 50 day, confirming momentum rather than a short squeeze. The market is repricing soybean oil relative to gasoil rather than signaling a shortage of vegetable oils.

BOPO

Flat prices reflect the same behavior. CBOT soybean oil traded near 57.1 cents per pound, up about 11 percent over three months. Palm futures stayed largely unchanged on the day. The move remains paper driven rather than physical.

European physical markets stayed calm. FOB Dutch soyoil held near 1,100 euros per ton for Feb Mar and about 1,090 euros per ton for April. German origin traded near 1,135 euros per ton nearby. Rapeseed oil showed limited firmness around 1,080 euros per ton. There was no sign of physical chasing to support futures strength.

The ARAG biodiesel window showed firm flat prices but worsening economics. FAME 0 average trades today were around 1,312 dollars per ton. RME averaged near 1,378 dollars per ton. UCOME traded closer to 1,420 dollars per ton. HVO Class II traded around 2,583 dollars per ton, up roughly 44 dollars per ton on the day. SAF remained near 2,061 dollars per ton. These values reinforce the margin squeeze rather than relieve it.

Screen biodiesel economics deteriorated further after adjusting for higher RINs. With D4 RINs near 1.475, implied biodiesel margins screen at negative 12.76 cents per gallon for March, negative 25.82 cents per gallon for May, and close to negative 30 cents per gallon for July. These calculations embed elevated RIN values and still exclude any 45Z benefit. Day on day, margins weakened by roughly 5 to 7 cents per gallon across the curve. Rising soybean oil prices absorbed the policy uplift. Oil share is now approaching 49%.

Backward looking feedstock data confirms producer behavior. November 2025 biodiesel and renewable diesel feedstock use declined about 18 percent year on year. Soybean oil share fell from roughly 36 percent to 33 percent. Canola declined from about 12 percent to 10 percent. Tallow increased from roughly 21 percent to 26 percent. The mix shift reflects margin math rather than availability.

Nov 25 Feedstock Use

Global supply remains heavy. Soybeans yield about 0.5 tons of oil per hectare, compared with roughly 0.8 for rapeseed and sunflower. Palm averages above 3.3 tons per hectare globally and reaches about 6.6 tons per hectare for top producers. Despite this yield gap, soybean acreage continues to expand. Since 2020, soybean planted area increased by roughly 1 million hectares in Brazil, about 0.9 million hectares in Argentina, and about 1.2 million hectares in Indonesia. Malaysia declined by about 0.3 million hectares. This acreage growth locks in additional oil supply.

Physical trade flows underline where soybean oil is discounted. Brazilian soyoil FOB Paranagua best bids remain near minus 660 dollars per ton for April. June and July barrels traded as low as minus 660 to minus 760 dollars per ton. At these levels, South American soyoil clears Asia competitively, including against crude palm oil. This caps palm upside and pressures biodiesel margins outside the U.S.

Inside the United States, pricing tells a different story. Domestic soybean oil remains elevated due to policy structure. With D4 RINs near 1.475, the U.S. operates as a soybean oil island. Prices reflect regulatory value rather than global supply. U.S. producers face high feedstock costs while international markets absorb surplus oil at deep discounts.

Palm oil commentary from Kuala Lumpur reinforces the timing issue. Bursa Malaysia April CPO traded near 4,150 ringgit per ton, down about 1.3 percent on the session. Malaysia January palm oil stocks fell to about 2.82 million tons, down roughly 7.8 percent month on month. Production dropped to around 1.58 million tons while exports rose to about 1.48 million tons. Near term pressure persists due to seasonal output in the first half of 2026. Medium term constraints are clearer. Aging trees, slow replanting, no land expansion in Malaysia, and fertilizer and land management limits in Indonesia point to slower growth. Conference estimates place global palm oil production growth near 1.3 million tons per year through 2030, down from about 2.0 million tons per year over the past decade.

Today’s WASDE delivered no tightening signal. Global soybean production increased by about 2.5 million tons, driven mainly by Brazil, with smaller gains in Paraguay. World soybean ending stocks rose by about 1.1 million tons. U.S. corn carryout declined by roughly 100 million bushels due to exports, while global corn balances remain comfortable. Wheat changes were minor, with world stocks slightly higher.

High RIN values keep the export door open while reinforcing domestic dislocation. Even with a 50 percent haircut, D4s near 1.475 leave an effective value of about 0.74 dollars per RIN. At 1.6 RINs per gallon, this equals roughly 1.18 dollars per gallon of support. This incentive applies to foreign producers under the RFS and exists without 45Z. Against screen losses of about 13 cents per gallon in March and more than 25 cents by May, the U.S. remains the highest value outlet despite weak underlying margins.

Bottom line. Crude holds a geopolitical premium and heat cracks remain strong, yet gasoil structure does not confirm stress. BOGO continues to run while BOPO lags. Soybean oil is abundant and discounted globally while staying expensive inside the U.S. Palm waits for the second half. Biodiesel margins stay negative across the curve even with elevated RINs. Policy shapes price, supply shapes flows, and margins absorb the adjustment.