Diesel Near $200 per Barrel in Singapore Puts Biofuels and Renewables Back in the Picture

Energy markets continue to reprice geopolitical risk as security in the Strait of Hormuz deteriorates. Reports circulated that three different classes of vessels including container ships, bulk carriers and tankers were attacked while transiting the strait, signaling that the disruption risk extends beyond crude cargoes to the entire maritime logistics system. Later reports indicated that Iran granted permission for Indian tankers to pass through the strait, suggesting that the waterway is not fully closed but rather operating under selective navigation permissions.

The distillate complex remains the clearest expression of this risk premium. Singapore 10ppm diesel pricing has surged toward the $200 per barrel level, an extraordinary benchmark that highlights how tight the global middle distillate system has become as shipping security deteriorates. The move comes despite massive emergency stock releases announced by governments. The United States Department of Energy confirmed a release of roughly 172 million barrels from the Strategic Petroleum Reserve while the International Energy Agency coordinated a potential release approaching 400 million barrels from member countries. Even with these volumes entering the market, prices continue to rise as traders increasingly price logistical disruption rather than crude availability.

Another important policy signal emerged in the United States with the waiver of the Jones Act, allowing foreign vessels to transport petroleum products between U.S. ports. Such waivers are typically reserved for emergency conditions and are interpreted by traders as an attempt to maximize domestic fuel distribution flexibility at a time when supply chains are under stress. Export restrictions on petroleum products cannot be far from this Jones act decision.

Vegetable oil markets moved higher alongside the energy complex. Chicago soybean oil futures rallied sharply with May trading near 68 cents per pound as stronger crude prices improved biodiesel blending economics. Palm oil followed the move with Malaysian May futures settling near 4,499 ringgit per tonne after touching 4,509 during the session as geopolitical tensions intensified.

Cash markets also reflected the volatility. Roughly 25,000 tonnes of soybean oil cargoes into India were reportedly washed out as freight costs surged and sellers attempted to renegotiate earlier trades. Spot CFR India soybean oil was marked near $1,255 per tonne as traders adjusted to tightening supply and rising freight risk.

At the same time the global oilseed complex is sending a different signal. Basis levels for soybean oil FOB Paranaguá have collapsed sharply with best bids now reported near minus 1,670 points below Chicago soybean oil futures. This extraordinary discount highlights the growing disconnect between U.S. soybean oil pricing, which is increasingly influenced by domestic biofuel policy and RIN values, and the broader global vegetable oil balance where South American crushing remains extremely active.

Another important signal in the feedstock market comes from shifting trade flows into the United States. Imports of animal and vegetable fats and oils remain elevated, but the origin structure has changed dramatically to other sources. The share of these imports coming from China has collapsed by roughly 82 percent between January 2025 and January 2026. The decline does not reflect weaker demand for feedstocks in the United States. Instead it highlights how policy and tariff structures are reshaping supply chains. When trade barriers rise the flows rarely disappear. They simply reroute through other origins and intermediaries, reinforcing the broader point that feedstock markets continue to adapt quickly to policy driven distortions.

European biodiesel markets remained calm but thin in today’s ARAG window. Trading activity was limited with RME averaging roughly $1,431 per tonne while FAME 0 averaged near $1,323 per tonne and UCOME around $1,412 per tonne. HVO Class II traded near $1,385 per tonne. The lack of significant physical activity suggests many traders remain cautious as volatility in the broader energy complex increases.

In the United States, D4 RIN values continue to trade in a wide range btw $1.50-1.60 range which keeps prompt biodiesel production economics marginally positive even as forward margins remain sensitive to feedstock costs and regulatory clarity. Rumors around upcoming EPA renewable fuel mandate decisions continue to support soybean oil futures.

This weekend now looks like a critical pivot point for energy markets. If the conflict escalates further and maritime disruptions intensify, markets could reopen Monday with significantly higher energy prices across crude and especially distillates. Governments already appear to be preparing for this possibility. Italy has formally asked the European Commission to suspend EU ETS carbon rules, effectively seeking relief from a carbon cost that acts as an additional burden on fuel during a period of severe energy inflation.

Political developments in Europe may add another layer of uncertainty. France holds the first round of municipal elections this weekend, an event that could have broader political implications for both France and the European Union depending on the outcome. A strong push to the right might force EU to soften some of its policies on energy.

For biofuels the implications are clear. When diesel approaches these levels, biodiesel and renewable diesel shift from being marginal blending components to becoming essential incremental supply for the global distillate pool. The main caveat remains the methanol constraint discussed in previous posts. Conventional biodiesel production in many regions remains sensitive to methanol availability and pricing, meaning that even if vegetable oil economics improve sharply, expansion in biodiesel output may still be limited if methanol supply tightens alongside the broader petrochemical complex. If tensions in the Middle East continue to escalate and shipping disruptions persist, vegetable oils will increasingly trade as extensions of the energy complex rather than purely agricultural commodities.