Energy-Led Rally Leaves Biodiesel Margins Behind

Gasoil prices jumped today, with ICE front-month contracts surging 3.84% to $717.50/mt—almost a full standard deviation move. This continues a sharp three-month uptrend of +16%, underpinned by tight distillate inventories and persistent geopolitical uncertainty. Soybean oil futures responded in kind, rising to 56.22¢/lb, also up 16% over the same period, aided by a strengthening South American basis and tighter domestic crush margins.

Of note, BOPO has now reached +$256/mt, as palm oil struggles to match diesel’s strength despite Indonesia reporting biodiesel consumption of 7.42 million kiloliters as of July 16. The muted response in palm reflects limited export uplift and persistent structural tightness in Indonesia’s domestic supply chain.

BOPO

Despite the bullish tone across energy and feedstocks, the U.S. biodiesel screen crush margin remains firmly negative at -33.95¢/gal. The modest rally in D4 RINs to $1.26/RIN has provided only marginal relief. The current setup continues to discourage soy-based biodiesel production by independent plants, leaving renewable diesel producers as the only segment capable of absorbing these feedstock prices with breakeven or better economics. In practice, very few biodiesel units are expected to be running full tilt using soybean oil.

In Europe, the ARAG spot market stayed characteristically quiet amid holiday-mode trading. However, pricing held up, with RME at $1,361/mt, FAME 0 at $1,335/mt, and UCOME at $1,455/mt—maintaining a consistent $120/mt premium to FAME 0. This reflects a stable soft oil environment even as physical trades remain sparse.

Back in the U.S., the uncertainty surrounding 2026–2027 RFS mandates continues to weigh on producer sentiment. While the recent public hearing showed broad support for higher volumes, concerns over small refinery exemptions (SREs) and ongoing RIN reduction provisions for imports have tempered optimism. Meanwhile, trade participants remain focused on the evolving U.S.-Canada trade tensions. No updates were released today regarding Canada’s pending tariff decision on U.S. renewable fuel imports, nor the reciprocal risk of a U.S. tariff on Canadian canola oil—a potential disruption to biodiesel feedstock flows that remains unresolved.

In short, energy and feedstocks are in rally mode—but discretionary biodiesel output remains structurally constrained by economics. Until feedstock markets ease or further policy signals are delivered, that imbalance is unlikely to change.