Diesel Is Targeting $200/bbl Again

August WTI expired near $85.17/bbl, up 2.3%, with the August/September spread at only $0.89/bbl. Brent traded near $90.72/bbl, while its September/December backwardation widened to $6.79/bbl. Those are firm numbers, yet they still look restrained beside distillates. August ICE gasoil reached $1,209.75/mt, up 26.1% over three months, equivalent to about $162/bbl. August heating oil at $4.129/gal equals $173.42/bbl, leaving the heat crack near $88.25/bbl. Crude moved higher, but diesel retained almost all of last Friday’s margin.

Gasoil

The March gasoil high of $1,554/mt is now the next visible target. Reaching it requires another $344/mt, or 28.5%, and would place European gasoil near $209/bbl. The curve already carries severe prompt tightness, with August/September at $50/mt and August/December at $218/mt. Reports of tankers reversing or avoiding Bab el-Mandeb add freight, delay arrivals and tie up vessel capacity. Continued escalation does not need a crude shortage to send diesel back toward $200/bbl. It only needs a longer voyage structure imposed on an already tight refining system.

SoH Traffic

BOGO delivered the clearest cross-market signal. The front spread fell $20.38/mt in one session to $424.52/mt, a 4.6% decline on the day and 26.8% over three months. Back in March, BOGO traded below +40!! Soybean oil itself remains firm near 74.23 cents/lb, above its 20-day weighted moving average, while the August/December backwardation recovered to +2.64 cents/lb. Gasoil rose faster, pushing soybean oil as a percentage of gasoil down another 1.6% on the day and 16.0% over three months. D4 RINs fell close to 20 cents/gal for the same reason. More petroleum value reduced the compliance value required to support blending. Screen economics improved despite weaker RINs. The September renewable diesel crush rose 9.96 cents/gal to 84.55 cents/gal, while the conventional biodiesel crush gained 9.22 cents/gal to $1.3503/gal. Europe showed the same redistribution.

BOGO

September RME traded at a +417/mt differential, down 8, and August FAME at +315/mt, down 5. August UCOME rose 4 to +454/mt and September UCOME rose 4 to +484/mt. Reported Paper UCOME volume reached 30.5kt, compared with 10kt for RME and 1kt for FAME. Lower biofuel differentials do not equal weaker outright values when gasoil adds this much support.

Feedstocks remain firm, but they are not setting the pace. August soybean oil trades near $1,611/mt, while August gasoil sits near $1,210/mt, leaving BOGO near +$425/mt. In India, August CPO near $1,230/mt stands only about $25/mt below soybean oil, limiting palm’s room to follow energy. Brazilian soybean oil basis remains near 20 cents/lb below CBOT, although Mato Grosso crushers face tight physical coverage and projected 2026/27 production costs of 58.7 bags/ha, 7.9% above the three-year average. The trading risk still points toward further BOGO compression, lower RIN contribution and higher outright biodiesel and RD values. A gasoil test of $1,554/mt would keep margins supported even if product premiums soften.