Flat Price Fallout Hits Biodiesel Hard
The latest EIA report rattled energy markets with a 3% drop in U.S. product demand alongside a build in crude and refined stocks, a clear sign that the U.S. economy is slowing. The reaction was immediate: backwardation in ICE gasoil collapsed, with Oct/Dec spreads plunging 25% to +15.75 and Oct/Jul spreads retreating to +45.50. Flat prices tumbled nearly a full standard deviation on the day, and when diesel or gasoil flat prices fall sharply, it is never good news for biodiesel margins or discretionary blending. The reason is structural: biodiesel and renewable diesel are, in essence, extensions of the diesel pool, and any erosion in demand for the broader pool has an outsized impact on biofuels since they represent only a smaller share of total supply.
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