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Despite bounce Fame trades in ARA $100/mt below BOGO while it has dropped 24% in last 3 months

Soybean oil could not go anywhere today after a nice bounce on Monday as FOB premium in SouthAm hardly moved and are still bid >-1000 with few offer better than -940. Lots of rumours about washout on SouthAmerican cargo of Biodiesel but considering that there were hardly any trades in FOB market, we can only guess that the market has rolled cargoes. The reason might be because of large biodiesel inventories in Europe that are simply too large because of record shipments of UCOME from China (535kt) in Jan&Feb. Fortunately the China custom data for Jan&Feb shows that large amounts of UCO exports (93kt) are now headed to USA and rest split halfway between Singapore strait and Europe for a total of 277Kt. This means that there will be less transformation in EU and that could help as there are plenty of floating bio cargoes on way to Europe from China & Strait (my estimate $200kt). It is important to note that this month while gasoil only dropped $32/mt, we have seen flat price Fame 0 in NW Europe drop $235/mt, RME dropped $294/mt and UCOME dropped $295/mt. On average bean oil is trading below FAME 0 in NW Europe (reflecting poor margins) with average down the curve of negative $122/mt while just last Friday we were trading negative $231/mt, so it is an improvement but F0 should really be trading at a $100/mt premium to Bean oil. . Gasoil remains plentiful everywhere we look and we can see that heat cracks improved so don't expect much help from Gasoil - the work will have to come from feedstock prices.

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