BOGO Rebounds on Biodiesel Day as Markets Navigate Regulatory Crosscurrents

The biofuels market experienced notable shifts this week, with the Bean Oil-Gasoil Spread (BOGO) bouncing back almost a full standard deviation today to +$290/mt as ICE gasoil dropped to $651/mt. However, soybean oil quickly adjusted course, following gasoil's downward trajectory in the late session and settling at a more modest +$286/mt. Looking at the forward curve through September, soybean oil is trading at nearly 1.5 times the price of gasoil, which typically signals overpricing in the market and suggests potential for downward price correction.

Meanwhile, replacement gross margins on FAME in the Amsterdam-Rotterdam-Antwerp (ARA) region have shown improvement, reflecting a +$32/mt gain at $1,225/mt in the spot market. Rapeseed oil maintains its position as the cheapest vegetable oil in Northwest Europe, showing a discount of nearly $80/mt compared to other oils, with the RME/F0 spread narrowing to just $32/mt. Spot data reveals the RME premium was assessed at +$605/t over ICE gasoil, up $29/t day-on-day illustrating the pressure on biodiesel prices following gasoil's decline.

As I've emphasized previously, bearish gasoil trends are never positive for biodiesel and HVO markets. Currently, HVO Class 2 and Class 4 are commanding a $200/mt premium over UCOME, highlighting the premium still placed on higher-quality biofuels despite overall market pressure. UCO prices have climbed to $1,250/mt in the ARA region, resulting in a $231 gross margin for flat price UCOME at $1,481/mt. This reflects the ongoing strength in waste-based feedstock demand despite challenges in the broader biofuels market.

Regional blending markets are showing divergent patterns, with strong markets in Spain compensating for weaker performance in France and Germany. According to recent Cores data, Spanish biodiesel and HVO demand rose by 11% year-on-year to 120,000t in January, despite a 2% decline in overall diesel demand to 1.73 million tonnes. This growth is largely attributed to Spain's increased blending mandate, now at 11.5% in energy terms for 2025, up from 11% previously. Meanwhile, regulatory pressures continue to shape the market, with the UK Trade Remedies Authority initiating anti-dumping and countervailing investigations into HVO biodiesel imports from the United States, adding uncertainty to trade flows.

On this Biodiesel Day (March 18), the industry faces significant challenges as Indonesia plans to raise its palm oil export levy to between 4.5% and 10% of the CPO reference price, up from the current 3% to 7.5%. This increase is directly tied to difficulties in funding domestic blending requirements as international diesel prices fall. With the Palm Oil-Gasoil Spread (POGO) now reaching +$322/mt while the threshold level is $275/mt, this levy increase was inevitable. However, it's likely to further restrict exports, similar to what Malaysia experienced, as palm oil prices remain unsustainably high.

In the U.S. market, D4 RINs prices have mirrored BOGO's rebound, climbing to 79 cents/gallon, but soybean biodiesel crush margins remain deeply negative at -40 cents/gallon down the curve, indicating continued pressure on producers despite the RIN support. The upcoming USTR meeting with shipping trade representatives on March 24 regarding the $1 million U.S. port charges for vessels with more than 50% Chinese-made components adds another layer of complexity to an already challenging global supply chain landscape for biofuels.