China Quotas Flood Asia, RME Margins Too Wide, U.S. Harvest Choked by Rivers, and D4 RINs Collapse on Fresh SRE Petitions

China has issued 8.4 million tons of refined product export quotas in its third batch this year. This will add more gasoline, jet fuel, and diesel into the global system and is bearish for petroleum products, especially ICE gasoil in October. Asian structures were already soft: the price spread between October and November narrowed for the third day in a row, refining margins fell back under $20/bbl, and cash differentials weakened as sellers pushed cargoes. East–West spreads remain discounted, so additional Chinese flows heading west will only add pressure.

Vegetable oils in Asia are also under strain. Crude palm oil (CPO) in Malaysia closed flat at RM4,474/mt ($1,069) after losing early gains, while China’s Dalian palm olein and soybean oil futures both declined. Malaysian exports in the first half of September were slightly lower than last year, while production fell more than 8% from August. Offers into India around $1,185 CFR are not attracting demand due to negative margins and high stock levels. The soybean oil forward curve highlights the pressure: the Oct/Jul contango has blown out to 1.30 cts/lb, an exceptional level, showing how reluctant buyers are to take prompt barrels and how much surplus is being carried forward.

Bean Oil Oct to Jul spread

In Europe, river navigation on the Rhine has returned to normal, allowing full barge loadings again. German crushers are pulling in more rapeseed, and exports of rapeseed oil are falling as more oil is held back for biodiesel production. The ARAG biodiesel window saw heavy activity, with one player consistently selling RME and buying UCOME. The logic is clear: RME gross margins are too wide. At $1,469/mt versus rapeseed oil at $1,263/mt, RME shows a $206/mt spread. FAME at $1,403/mt against soybean oil at $1,263/mt yields +$140/mt. UCOME at $1,507/mt versus UCO at $1,250/mt gives +$257/mt. On paper, RME looks profitable, but UCOME offers 89% GHG savings compared to 60% for RME and requires lower transformation costs. For compliance buyers, UCOME is clearly the better option, and the trade flows reflect this.

The weak dollar (EUR/USD 1.18) is amplifying arbitrage. Selling biodiesel domestically in euros looks attractive, which fuels buying interest in the window. However, production costs are in euros, so when net margins are calculated, the picture looks far less favorable. Producers remain squeezed even as trading spreads appear wide. Meanwhile, BOGO slipped 2% to +456 for December, and Oct/Jul widened further to –$92/mt, echoing the same oversupply pressure visible in soybean oil where the Nov/Jul spread is -1.30!!

Nov/Jul Bean oil spread

In the U.S., the Mississippi River is becoming the critical bottleneck. Levels at St. Louis and Vicksburg continue to fall just as soybean and corn harvests accelerate. With a bumper crop and already weak export sales, grain is piling up inland and Nov/Mar carries are widening fast. Poor river navigation is turning into a logistical nightmare. This administration seems to have no understanding of the havoc a bumper crop can create when the river system breaks down. The Mississippi is not just another waterway — it is the backbone of U.S. grain exports, and when barge drafts are cut, the entire chain suffers, from farmers to exporters to crushers.

Today it was 1.7 ft

At the same time, D4 RINs fell again to $1.017 for Dec, down more than 1% on the day, showing how fragile credit values have become. The problem is compounded by a wave of new small refinery exemption (SRE) petitions filed at the EPA, including retroactive claims going back to 2021. Because there is no deadline for EPA decisions, obligated parties are left uncertain about enforcement and reallocation. That confusion is further depressing RIN values right when the harvest glut needs demand support the most.

The global map heading into Q4 is fractured. Asia faces oversupply from Chinese petroleum product exports and weak palm demand, Europe sees biodiesel spreads where RME is overpriced and UCOME is the smarter buy, and the U.S. is trapped by river bottlenecks and a collapsing RINs market clouded by SRE petitions. The unifying theme is not only worries about demand growth but logistics, spreads, FX, and policy distortions driving the market. Not a pretty picture. Defensive positioning required.