Fueling Uncertainty: Euro Surge, RINs Slide, and Chinese UCO Heads to the Emirates

The euro’s 7% appreciation versus the U.S. dollar over the past three months has injected renewed strength into commodity pricing. This FX tailwind has supported metals and energy alike, with gold testing $3,351/oz and crude oil staging a rebound despite OPEC+ raising output. However, gasoil remains subdued as reportedly massive amount of petroleum products may have moved into storage over the past 100 days (Gulf Intelligence)—despite backwardation. This paradox reflects poor underlying demand, which is helping keep ICE gasoil below $630/mt even amid a weaker dollar.

BOGO values, which track soybean oil versus gasoil, have risen to +416, up 35% since March, while FAME 0 barges in ARAG traded last at +691 over ICE gasoil, giving flat prices near $1,317/mt. RME is only marginally higher at $1,329/mt, maintaining a narrow $12/mt spread. Despite broader macro tailwinds, gross transformation margins for F0 remain above $100/mt—quite healthy in the context of soft physical gasoil and muted end-user demand.

Although the latest U.S. feedstock consumption figures from the EIA are somewhat dated, covering March 2025, they provide a sobering snapshot of Q1. Total feedstock use for biodiesel and RD production was 2.693 billion pounds, down 6.3% year-on-year. Most feedstocks posted steep declines—canola oil usage fell nearly 27%, and yellow grease dropped over 20%. One notable exception was corn oil, which rose nearly 13% year-on-year. This suggests refiners are optimizing around low-carbon intensity scores under evolving frameworks like 45Z and LCFS, which reward certain waste-derived and coproduct-based feedstocks.

On the vegetable oil front, European rapeseed oil continues to trade at a significant discount to soybean oil. The ASO strip for RSO was assessed at €979/mt, nearly €59/mt below comparable soy values. This backwardation in rapeseed—where front-months are €60–100/mt over deferreds—reflects tightening old-crop stocks. Meanwhile, soyoil futures remain relatively flat, further enhancing the discount appeal of RSO for biofuel blending.

In the U.S., D4 RINs have slipped to 94¢/gal, signaling the market’s skepticism that higher RVOs are on the near-term horizon. Instead, the focus remains firmly on unresolved SRE exemptions, which continue to cast a long shadow over the compliance landscape. At the same time, the biodiesel screen crush margin remains deeply negative at -50¢/gal, underscoring just how misaligned current feedstock prices are with biodiesel economics—especially in the absence of certainty around future RIN values or federal credits.

Finally, trade flows are adjusting in response to eligibility rules under the 45Z framework. Several Chinese UCO cargoes originally destined for the U.S. have now been resold to the UAE—reportedly for co-processing. This rerouting reflects the tightening compliance environment in the U.S., where 45Z eligibility excludes most foreign-produced fuels, even as state programs like LCFS still offer value. Neste’s subdued purchasing behavior in Singapore suggests the market is pausing for clarity, but for now, the arbitrage opportunities continue—just not always in the originally intended direction.