Flat prices refuse to crack

In ARAG, the window showed limited headline movement over the past week. RME flat price edged up from 1372 to 1375. The adjustment came through weaker premiums versus ICE gasoil, now near plus 697. HVO Class II moved lower, with flat price down from 2511 to 2462, driven by a premium compression of around 55 per metric ton. UCOME stayed broadly stable, with flat price easing from 1421 to 1405 and premiums adjusting lower by about 25 per metric ton, in line with RME. SAF prices were slightly higher at 2079 versus 2058 last week.

European biodiesel paper confirms the physical picture. Over recent weeks, paper curves show flat prices holding while premiums absorb most of the correction. RME and FAME structures remain shallow, offering little incentive to push barrels forward. This matches steady clearing of ARAG barges. UCOME paper remains better supported, pointing to tighter availability rather than fresh demand. HVO paper softened alongside physical premiums, reinforcing a premium led adjustment rather than a breakdown in flat price value.

Energy remains the dominant macro driver. ICE gasoil rallied strongly, even though it still trades below the 20 week DWMA. Feb Apr backwardation widened to around plus 20/mt from plus 10/mt last Friday. In the US, the move is weather driven. Cold conditions pushed sharp gains across the gas complex. Heating oil Feb Apr backwardation expanded to plus 0.16 from plus 0.04 last week, signalling tighter prompt fundamentals. This explains why biofuel flat prices held firm despite softer premiums.

Policy signals intensified on both sides of the Atlantic. The Fuels of the Future conference in Berlin took place at the same time as the Clean Fuels Conference in Orlando. In Europe, industry repeated a clear message, technology is ready and investment depends on durable greenhouse gas quota rules, certification clarity, and fraud control. Calls to lift caps on crop based biofuels and to allow higher near term blends reflect simple math, declining fossil demand reduces absolute emissions savings unless mandates adjust. In the US, Orlando discussions unfolded against ongoing uncertainty around RVOs, tax credits, and political sequencing.

US RINs added a critical layer. D4 RINs strengthened to around 1.36, materially improving biodiesel margins. The screen biodiesel crush moved sharply less negative across the forward curve, improving by roughly 20 to 30 cents per gallon versus earlier levels, even before any 45Z contribution. Economically, RINs are carrying biodiesel viability. Politically, these levels raise compliance costs for obligated parties at a sensitive time, increasing the risk of pushback, delays, or tactical relief rather than stronger mandates.

Asian vegetable oil markets added background support. Palm oil futures in Malaysia extended gains on slower production, improving export data, and strength across the Chinese vegoil complex. Chinese palm olein, soyoil, and rapeseed oil futures moved higher, while CME soyoil softened on weaker crude and product spreading with soymeal. Physical markets in Asia stayed active but price sensitive, with India showing limited appetite for soft oils and continued palm flows into China. This keeps global vegoil tone constructive without forcing prices higher.

Italian policy news landed as expected. Italy formally passed its RED III transposition, keeping 2026 to 2029 biofuel targets unchanged while raising the 2030 renewable transport target to 29 percent and confirming 10 percent biodiesel blends. Near term targets are set to be updated later this year through a ministerial decree. This removes uncertainty without adding immediate demand signals.

Agricultural signals remain mixed. CBOT soybeans recovered part of last week’s losses but remain well below the November peak. Brazilian supply continues to weigh on global balances, with CFR China basis tracking patterns seen in 2023. Brazilian farmer margins remain under pressure, amplified by FX, with inputs bought at stronger BRL levels and beans sold at weaker rates.

Logistics added another variable. The Mississippi River at St. Louis dropped sharply to among the lowest readings on record for this time of year. Barge restrictions and rising freight costs tighten near term flows and deserve close attention for US basis and crush economics if conditions persist.

Overall, flat prices are holding on energy strength, weather effects, and credit support. Premiums continue to absorb the adjustment. Policy direction supports biofuels in theory but remains fragile in execution. This mix keeps volatility elevated across biofuels, feedstocks, and credits.