BOGO Carry (Contango) Defies Feedstock Fundamentals

The passage of the Big Beautiful Bill (BBB) through the House marks a pivotal moment in U.S. biofuels policy. Expected to be signed into law by President Trump on July 5th, the legislation now hands implementation responsibility squarely to the EPA. Industry stakeholders are reminded that the public consultation period on the RVOs—and particularly the proposed RIN reduction for foreign producers—remains open until August 8. Yet despite this legislative clarity, D4 RINs continue to show minimal response, with the December 2025 contract closing at 1.192, down modestly. The market appears to be waiting for concrete implementation details before re-pricing the fundamentals.

BOGO for July settled just under +490, with the August print reaching +519. This steepening curve has created a contango structure, with a carry of -$76/mt extending all the way to January 2026. What makes this even more remarkable is that the carry in soybean oil through December has essentially disappeared, while ICE Gasoil is trading in a sharp +73.25/mt backwardation. The market is effectively encouraging biodiesel and RD producers to store product now and sell it later in the year, betting on higher replacement values or stronger mandates ahead.

In Northwest Europe, rapeseed oil prices continued their descent, widening the discount to soybean oil to nearly €105/mt. August Dutch rapeseed oil was assessed at €1,025/t, while soybean oil was pegged at €1,130/t. This structure now heavily favors RME over SME and FAME, especially as premiums in the barge market have remained well supported. With RME typically used in winter due to its superior cold weather performance, the current contango creates a strong incentive for traders to store RME now and release it later in Q4. This seasonal positioning aligns both with the economics and the logistics of the biodiesel trade.

Technically, ICE Gasoil remains weak. While the heat crack margin surged during the session to $33.43/bbl before settling slightly lower at $32.19/bbl, Gasoil futures closed at $721.50/t—still well below the 200-day moving average of $779.05/t. With the OPEC+ meeting looming this weekend and Brent backwardation to December holding at +$2.48/bbl, traders are speculating that more barrels may hit the market, which could keep pressure on middle distillates even as cracks remain elevated. Meanwhile, UCOME continues to look like a good deal in Europe—holding a premium of just +$109/mt over FAME 0, it offers high GHG savings and policy alignment at a reasonable spread.

Gasoil

And on this 4th of July eve, it’s worth remembering a quirky chapter of American independence. While Beaumarchais was penning “The Marriage of Figaro”—a play so revolutionary it would be called woke today—he was also smuggling arms for the French Crown to aid the American colonies. Muskets and munitions, hidden under corsets and wine barrels, made their way across the Atlantic passed the English blockade and played a decisive role at the Battle of Saratoga. Markets may be rational, but history is rarely tidy. Happy Birthday, America!