FX Eases, Curves Flatten, Biodiesel Margins Decide

European markets closed Monday with pressure concentrated not in outright energy, but in structure and margins. ICE gasoil flat price is trading near $623/mt, down roughly 6% over the past three months, while time spreads continue to erode. Jan/Apr backwardation is now +12.50, down more than 10%, with Jan/Jul at +22.50, confirming that front-end tightness continues to fade rather than invert. From a technical perspective, the 20-day weighted DMA is converging toward the 50-day, a configuration that has historically coincided with further compression in distillate cracks once backwardation falls into the low-teens.

ICE Gasoil

FX markets are reinforcing that signal. USD/RUB is trading at 79.49, down 0.36% on the day and back below 80, a level that has repeatedly coincided over the past six months with reduced geopolitical risk premium. While no formal announcements have been made, the currency move continues to suggest that markets are pricing ongoing negotiations rather than renewed escalation. In that environment, diesel has historically converged toward gasoline rather than decoupled higher.

RUB

On the regulatory front, the UK Trade Remedies Authority has proposed maintaining countervailing duties on Indonesian biodiesel in the 8%–18% range, while explicitly excluding sustainable aviation fuel from the product scope. The revised definition covers fatty-acid mono-alkyl esters and paraffinic gasoils of non-fossil origin, excluding SAF whether blended or neat. This preserves a clear regulatory divergence: biodiesel remains constrained, while SAF retains optionality.

In ARAG, the margin stack continues to explain price behavior better than any single headline. RME barges are trading at $1,493/mt, while rapeseed oil (Dutch origin) is priced at €1,098/mt. Using an FX rate of 1.1763, that implies a feedstock cost of $1,291.6/mt and a gross margin of roughly $201/mt. While this is down from approximately $260–280/mt three months ago—a compression of about $70/mt or 25%—RME margins remain commercially attractive and continue to support rapeseed oil relative to other soft oils.

By contrast, FAME 0 barges at $1,310/mt are generating only about $28/mt of gross margin, leaving soy-based biodiesel effectively flat. UCOME barges at $1,449/mt, against UCO prices near $1,150/mt, imply a gross margin close to $299/mt, the strongest in the complex. This margin dispersion matters directly for spreads: soy-based pathways are being displaced by waste- and rapeseed-based production.

That dynamic is clearly visible in BOGO, which is trading near +467/mt. The curve shows a contango through July of –$49/mt, followed by a modest Jul/Dec backwardation of +$7.90/mt, indicating that the market is deferring soy demand into late 2026 rather than the first half. Technically, BOGO’s 20-day weighted DMA has crossed below the 50-day, a signal that has historically aligned with multi-week periods of soybean oil underperformance rather than short consolidations. At current levels, BOGO weakness is being driven by margin math, not by a lack of biodiesel production.

BOGO

In the United States, fundamentals continue to lean against bean oil. Latest monthly data show U.S. soybean oil stocks at 1.513 billion pounds, up roughly 40% year-on-year and above the average trade estimate of 1.408 billion pounds. Soybean crush totaled 216.041 million bushels, below the average trade guess of 220.29 million bushels, confirming that higher stocks are not being offset by stronger disappearance. With no guidance yet on 45Z, the market is discounting near-term growth in soy oilshare contribution, reinforcing pressure on BOGO and FAME margins.

Asia continues to signal substitution rather than expansion. India imported 632,341 metric tons of palm oil in November, up 5% month-on-month, while soyoil imports fell to 370,661 tons, down 18%, and sunflower oil imports dropped to 142,953 tons, down 45%. Total edible oil imports declined to 1.15 million tons, a 13.3% month-on-month decrease, underscoring that palm’s gain is coming at the expense of soft oils rather than from incremental demand.

In Singapore, bunker data underline the same theme. Total marine fuel sales reached 4.82 million metric tons in November, essentially flat month-on-month (+0.1%) but up 8.0% year-on-year. Within that total, bio-blended fuel sales fell to 62,200 tons, the lowest year-to-date level, while LNG bunker sales declined to 55,000 tons, down 9.2% month-on-month. Discretionary bio demand continues to retreat when margins and mandates fail to align.

Taken together, the numbers are consistent. Diesel backwardation has compressed to +12.50 Jan/Apr, BOGO sits at +467 with a –$49/mt contango through July, RME margins remain positive at $201/mt, FAME margins are marginal at $28/mt, and UCOME continues to clear at $299/mt. These data points indicate a market pricing a soft first half of 2026 for soy-based biodiesel, while maintaining support for waste- and rapeseed-based pathways until clearer regulatory guidance emerges.