Diesel Refining Margin Near $109/Brl Meet Weaker Soyoil and Higher Financing Costs
Thursday’s intraday screens showed November Brent at $107.24/bbl, up $4.16, and November WTI at $95.64, up $3.48. The separate diesel-crack chart stood at $108.97/bbl, calculated from ULSD at $4.8696/gal multiplied by 42, less WTI at $95.55/bbl. These are snapshots at different times, rather than a synchronised closing assessment. There is also numerical support for a strong refining-quarter outlook: Marathon Petroleum’s blended benchmark crack averaged $46.17/bbl in July–August, versus $33.54 in Q2, a 37.7% increase. September was still blank in its published table, so this supports expectations of strong Q3 results without establishing record earnings. A product crack is also not a refinery’s net profit. On export policy, the September 23–24 reporting supplied points to voluntary restraints, while the White House denied the reported 90-day blanket ban. My reading is that traders should assess restrictions as a scenario: fewer US exports could weaken domestic diesel prices relative to overseas markets, but the scale cannot be quantified without an agreed volume or policy text. Any concrete measures by the admin on the diesel ban will cause a massive panic to book diesel freight ahead of the ban.
In Northwest Europe, Thursday’s physical window recorded two RME transactions, one UCOME transaction and no transactions in either FAME0 or HVO Class II. That establishes limited activity in this window, rather than proving that the entire physical market was inactive. Reported flat values were $1,891.70/mt for RME, $1,820.20 for FAME0, $1,955.20 for UCOME and $3,044.28 for HVO II; the FAME0 and HVO figures were indications without window trades. RME stood $71.50/mt above FAME0 and UCOME $135 above it. Paper provided more activity: Brokers recorded 65 kt of HVO II turnover, comprising 60 kt in October/November and November/December spreads and 5 kt in outright November and December business. Turnover should not be confused with physical consumption. On the intraday gasoil screen, October was $1,486/mt against December at $1,357, a $129 backwardation. For a cargo bought against prompt values but delivered later, that price structure makes timing and the matching hedge month a measurable part of the economics. Oct/Jan Gasoil dropped 14% to +171.25 as industry doubts on US bans is being traded.
In the United States, the strongest evidence concerns weak export sales and soybean oil’s declining contribution to crush value. For the week ended September 17, soybean export sales were 582,000 tonnes against expectations of 1.5–2.0 million, missing even the bottom of the range by 61.2%. The separately announced 120,000-tonne sale to China should not be added to that earlier reporting week. Oilshare was 47.18% on the supplied chart, approximately 6.8 percentage points below its June peak near 54%; the same snapshot showed soybean oil down 0.30 cent/lb and meal up $4.40/short ton. That demonstrates relative oil weakness, not a collapse in crusher demand. Indeed, the crush screen retained a previous December indication of approximately $2.43/bushel, although it was not a fresh trade. December soybean oil around 67.6 cents/lb left BOGO approximately $132–135/mt at the supplied snapshots, while October BOHO was about 13.3 cents/gal versus 54.8 cents for December. These are feedstock-versus-fuel comparisons before other costs. December D4 RINs were $2.10, down 1.18%. Without a current harvest percentage or fresh crush-volume report in the supplied material, accelerated harvest and stronger processor demand remain explanations to test rather than established facts.
In Asia, Broker's end-of-day Q4 palm-minus-gasoil spread was minus $156.28/mt, compared with plus $36.41 for Q1, a $192.69 change between delivery periods. Q4 palm was $1,204.50/mt against $1,251.50 for Q1. Those figures show that the prompt feedstock discount to diesel does not extend unchanged into next quarter; they do not establish a finished biodiesel margin after conversion, freight and specification costs. Brokers also reported India’s basic import duties on crude palm and soybean oil falling from 10% to 5%, with three October CPO parcels purchased, although parcel tonnages were not disclosed. That is evidence of buying, but insufficient to quantify the overall demand response. For Chinese UCO, the digest’s latest public standard RED bulk FOB range was $1,120–1,140/mt and its premium range $1,170–1,180, both dated September 18. They should not be presented as September 24 assessments or combined with today’s European prices to claim an executable arbitrage. EcoCeres’ September 24 HVO announcement for AstraZeneca’s Wuxi backup generators disclosed no supply volume, making it an application-development story rather than evidence of a measurable change in the regional balance.
Freight, interest rates and the dollar add quantifiable execution costs. The supplied September 23 Wall Street Journal report describes urgent Panama Canal auction bids of $4–5 million, versus an average around $380,000 this season and approximately $150,000 between October 2025 and March 2026. The seasonal average therefore increased roughly 153%; the exceptional $5 million bid was about 13 times that average, rather than a normal transit tariff. Daily crossings were reduced to 32 from the 34–36 cited before the war. Meanwhile, the supplied bond report placed the US 10-year yield near 5.09%, after touching 5.145%, and the two-year near 4.9%, leaving a positive spread of approximately 19 basis points. DXY was 101.065, up 0.25% on the day and 1.14% on the week. The cost implications can be illustrated without assuming an actual financing quote: an additional one percentage point of annual interest on a $1,500/mt cargo financed for 60 days adds approximately $2.47/mt. A 1% appreciation of the dollar against a buyer’s funding currency raises the local-currency cost of an unchanged dollar invoice by roughly 1%; DXY’s move is not itself that buyer’s exchange-rate change. These calculations explain why a favourable BOGO or POGO spread must be checked against actual freight, financing, currency and delivery terms before being treated as a captured margin.
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