Energy Leads the Selloff — BOPO Breaks as Distillates Soften and SAF Narratives Multiply

Energy weakness dominated today’s price action, setting the direction for biofuels and vegetable oils. Markets continued to price an easing geopolitical risk premium, with refined products under sustained pressure. The signal from fuels was clear and quantifiable: gasoline is surplus and distillates are losing tightness, and biofuels are adjusting mechanically.

In Europe, vegetable oils softened further across the forward curve. Northwest European soyoil values for early-2026 delivery were marked down by roughly €5–10/mt, while rapeseed oil slipped by €3–10/mt across nearby and forward months. Palm weakness out of Asia continued to transmit into European pricing, keeping curves flat to softer. Biodiesel flat prices followed lower, but the defining development was in spreads. Paper activity in Europe is leading entire market and is winding down as we are now celebrating Hanukah this week and Christmas in less than 10 days..

European Paper Trades

BOPO was the key signal of the day. BOPO fell 25% to +81.94, down from levels above +110 earlier this month. BOGO weakened to +455, reflecting remaining tightness in gasoil versus biodiesel paper. This divergence matters: at sub-$100/mt equivalents, BOPO no longer cushions soy-based biodiesel economics — it actively transmits weakness from energy and feedstocks into margins.

It is important to be precise: BOPO is not a European-driven phenomenon. It is a cross-basin signal rooted in US distillate pricing and Asian palm oil, with Europe absorbing the move rather than initiating it.

The energy impulse originates in the United States. On gasoline, the curve is decisively bearish: RBOB Jan/Apr is at –24 c/gal, explicitly pricing surplus supply and weak demand expectations into early 2026. On distillates, backwardation has collapsed. Heating oil (ULSD) Jan/Apr is just +7 c/gal, a thin structure that confirms middle-distillate tightness is eroding rather than building. Globally, ICE gasoil backwardation continues to compress, reinforcing the same signal coming from the US complex.

That energy weakness flows directly into biodiesel economics. In the United States, implied biodiesel crush margins remain negative across the curve, even after a modest day-on-day improvement. Using current futures relationships, curve margins sit between –$0.33 and –$0.54 per gallon, despite an improvement of roughly $0.04/gal. This is energy-led stabilization, not a feedstock recovery. Consistent with that signal, Dec-26 D4 RINs traded around $1.09, down roughly 2.4% on the day, with limited volume and follow-through.

D4 RINs

The pressure on soybean oil is also visible in actual blending behavior, not just futures. Implied oilshare has rolled over sharply, now sitting near 44.4%, down from 48–50% earlier in the year. This confirms that soybean oil is not being displaced by competing feedstocks, but by a reduced incentive to blend at the margin as energy weakens.

Oilshare

Only downstream of energy does bean oil adjust. Front-month soybean oil is trading near 49.5 c/lb, down roughly 10% over the past three months, but this move is reactive rather than initiating. That vulnerability is amplified by policy delay. EPA has now formally indicated that final 2026–27 RFS RVOs will not be issued until Q1 2026, leaving the market without visibility on mandated volumes or oilshare for more than a year.

In Asia, the pressure reinforces the move. Palm oil is down roughly 11% over the past three months, weighed by rising stocks and softer exports. Palm remains highly correlated with global waste vegetable oil pricing, which feeds directly into biodiesel economics outside the US. While Germany has effectively removed palm-based wastes from its domestic biodiesel pool in exchange for ending double counting. European waste oil pricing still clears against global values where palm remains a reference barrel, keeping pressure on waste oils and reinforcing the BOPO breakdown.

Against this backdrop of weakening prices, SAF narratives continue to accelerate, widening the disconnect between near-term pricing and medium-term policy signals. Indonesia reiterated plans to redirect surplus diesel into aviation fuel from 2026 as B50 ramps up, while Malaysia announced it will fast-track SAF licensing to attract foreign investment. In the US, Carolina Renewable Products broke ground on a renewable diesel and SAF-capable facility, signaling continued capital commitment despite compressed margins.

At the same time, EcoCeres’ attainment of RSB ICAO CORSIA certification materially enhances its strategic position in the SAF market. While the certification does not itself constitute a standalone book-and-claim system, it establishes the verified sustainability, lifecycle GHG reduction, and traceability framework required to generate auditable SAF environmental attributes that can be transferred and monetized separately from physical fuel delivery, supporting airline and corporate Scope 3 emissions claims under CORSIA-aligned frameworks.

In the United States, the demand narrative is also broadening beyond road fuels. The launch of the American Biofuels Maritime Initiative highlights shipping as a potential long-term outlet for renewable fuels; however, this industry-led push sits uneasily alongside a federal stance that has expressed reservations toward binding IMO/MARPOL fuel-emissions rules and warned against trade-distortive enforcement. The result is a clear signal that maritime biofuels represent a medium-term optionality, not a near-term regulatory driver.

The message from today’s price action is consistent across regions. Energy is leading, policy is lagging, and biofuels are adjusting accordingly. With BOPO at +81.94, US crush margins at –$0.33 to –$0.54/gal, oilshare down to ~44.4%, RBOB contango at –24 c/gal, and HO backwardation at just +7 c/gal, markets are pricing energy weakness and policy absence, not future mandates.

For now, distillates, spreads, and blend economics set the price. SAF and maritime fuels are shaping the medium-term capital map — but today, energy still leads.