Energy Reprices Higher as Market Positions Into Weekend Risk, Distillates Tighten Further and Biodiesel Follows

The energy complex has shifted from reacting to positioning. Brent is trading at $107.48/bbl, up $5.26 or +5.15%, while WTI is at $94.64/bbl, up $4.32 or +4.78%. This move reflects a repricing of risk rather than new fundamentals as the physical situation remains unchanged. The Strait of Hormuz is still operating at severely reduced capacity with flows running roughly 95% below normal levels and limited to selective vessels. This creates a clear asymmetry where short positioning becomes difficult to carry into the weekend.

At the same time, the Russia axis is becoming more relevant for energy pricing. Recent drone attacks have impacted refining infrastructure and export logistics, with estimates suggesting that up to 40% of Russia’s refining capacity has been affected at times. In addition, the attack on a tanker near the Bosphorus carrying around 140,000 tons of crude introduces a new layer of transport risk. This combination reduces Russia’s ability to take advantage of high prices and removes incremental supply from the system at a time when it is most needed.

Distillates are leading this repricing. Singapore 10ppm gasoil is back to $216.42/bbl, up $10.74 on the day, with cracks near $62/bbl. In the US, heating oil futures are up between +5% and +7% across the curve, with the front month at $4.28/gal and more than +100% over three months. The prompt HO spread has widened to 0.7857, up 12.97% on the day, confirming tightening front-end structure. What is good for diesel is good for biodiesel, and the strength in heating oil is now directly lifting biofuel pricing and margins. Pump diesel prices in America finally injecting some fear with consumers.

What is truly worrying in the distillate complex is the structure. The ICE gasoil Apr/Dec backwardation is now around $448/mt, with Apr at $1304.75/mt and Dec at $856.75/mt. Historically, anything above $100–150/mt signals tightness. At nearly $450/mt, the market is effectively forcing immediate consumption and penalizing storage. This confirms a structural shortage of prompt barrels and no buffer in the system. In this environment, any disruption translates directly into higher prompt prices.

The divergence across the barrel remains critical. Singapore fuel oil inventories are still above 24 million barrels, while VLSFO cargo values have dropped to around $805.93/mt with differentials near $53/mt. This confirms that the constraint is not crude supply but refining output of middle distillates. With Russian refining under pressure, this imbalance is likely to tighten further.

In Northwest Europe, biodiesel pricing continues to follow gasoil strength. RME April traded around +$170–190/mt over ICE gasoil, implying a flat price near $1,480–1,500/mt. FAME 0 traded near +$120–140/mt, giving flat prices around $1,420–1,450/mt. UCOME remains elevated at +$300–330/mt, translating to flat prices in the $1,600–1,650/mt range. These premiums are holding despite limited liquidity and reflect direct support from gasoil rather than feedstock. Gross replacement margins remain very positive, with RME margins near $200/mt based on RSO around €1,100–1,125/mt.

In the US, biodiesel economics are strengthening rapidly. The April biodiesel crush margin reached 1.1456, up 23.55% on the day and more than 150% over three months. May margins stand at 0.5713, up 29.55% on the day. This is driven by higher heating oil and D4 RINs at 1.712, confirming that the compliance system remains tight rather than oversupplied.

Vegoils are not driving this move, but positioning is extreme. CME soybean oil is trading at 68.02 c/lb, up roughly 3–4% on the day and equivalent to about $1,500/mt. Oil share is near historical highs, confirming that large speculative length is concentrated in soybean oil within the complex. At the same time, bean oil as a percentage of gasoil has dropped to 1.2945 from 1.4055, down 7.9% on the day and nearly 29% over three months, while BOHO is down more than 40% over the same period. This shows that soybean oil is not leading energy but is fully owned and priced, leaving it coiled and vulnerable to positioning shifts.

The soybean oil market is now clearly waiting for the EPA announcement tomorrow, and positioning suggests a large part of the bullish outcome is already embedded. Soybean oil is up more than 30% over three months, oil share is near historical highs, and D4 RINs at 1.71 already reflect a tight compliance system. If the EPA confirms RVOs in the 5.4–5.6 billion gallon range with limited surprises, the market risks a sell-the-fact reaction. If the announcement exceeds expectations or tightens further on SRE treatment or enforcement, soybean oil can extend higher. The bar is high and oilshare already trading at nearly all time high. So NO disappointments are allowed.

On the supply side, soybean fundamentals remain stable but not tight. EU imports are down to 8.7 million tonnes, a decline of 1.1 million tonnes year-on-year, with US flows dropping from 5.2 to 4.1 million tonnes. South American production remains strong with Brazil at 184.7 million tonnes and Argentina at 47–49 million tonnes, ensuring continued availability of feedstock.

The FX and rates complex is reinforcing the current energy strength. The DXY is near 99.7 while EUR/USD has weakened to around 1.1570. This dollar strength is driven by rising US yields, with the 10-year Treasury now above 4.40%. USD/RUB has moved higher toward 81–82, suggesting fading expectations for negotiations with Russia. CNY remains stable at 6.91, while USD/JPY is approaching 159–160. This increases the cost of energy imports globally and reinforces upward pressure on prices.

Across Asia, diesel markets have rebounded but physical activity remains thin, indicating that buyers are cautious at higher price levels. Naphtha cracks remain near record levels around $404/mt, confirming strong refinery margins.

The key takeaway is that the market is clearly positioning for the weekend. Distillate tightness remains the dominant force. Biodiesel follows diesel higher through flat price and margin expansion, while vegoils are heavily owned and already priced. If escalation occurs, both diesel and biodiesel move higher together. If tensions ease, the downside is limited by tight prompt supply, with the main risk shifting to a positioning unwind in soybean oil rather than in energy.