Gasoil Backwardation Erupts as Flat Price Snaps Higher — BOGO Collapses While BOPO Surges

The defining feature of today’s session was the violent extension of extreme backwardation in ICE gasoil, with the Dec/Apr spread blowing through +100/mt for the first time in years. As anticipated yesterday, such an unsustainably tight structure was bound to trigger a snapback in flat prices — and it did so with force. Gasoil rebounded above $785/mt, pulling the entire distillate complex higher and resetting biodiesel price relationships across the board. The result was immediate: BOGO collapsed back to +358, erasing the previous day’s strength, while BOPO continued its march upward to +150, propelled by firm bean oil and latent palm support.

Yet the deeper story lies in the structural signal coming from heating oil. The heat crack has blown out to $52/bbl, one of the highest levels seen outside of wartime or pandemic dislocations. This is a three-alarm fire in the distillate market. Heat cracks above $50 indicate not just tightness but outright supply stress across the Atlantic Basin. At these levels, refiners are incentivized to push every possible molecule into middle distillates, backwardation becomes self-reinforcing, and cross-basin arbs flash open. This is exactly the environment we are in now — a global scramble for diesel and jet fuel that is cascading into biodiesel pricing.

Asian middle distillates reinforced the same bullish tone. Diesel and jet cracks surged back to two-year highs, supported by limited December arrivals into Europe, ongoing Asian refinery maintenance, and China keeping diesel exports below 400,000 mt for next month which is surprising. Cash differentials for 10ppm gasoil climbed toward $3/bbl, while jet premiums extended into multi-year highs. In one of the clearest signs of global imbalance, India exported a jet fuel cargo to Los Angeles, filling a supply shortfall on the U.S. West Coast. This arb is almost always serviced by Japanese barrels when local supply tightens — almost never by India. That this long-haul route opened at all confirms the severity and breadth of the current distillate squeeze.

In the European biodiesel market, the window captured the repricing in real time. FAME 0 indications near +$575 over gasoil translate to flat prices around $1,352/mt, while RME at +$747.50 gives a flat price near $1,524/mt. The RME/FAME spread widened to 172.50, driven overwhelmingly by energy structure rather than feedstocks. UCOME at +780 implied a flat price around $1,556/mt, placing the UCOME/FAME spread at 205. Waste-based grades remain firm into year-end as availability tightens, but gasoil’s structural volatility is driving the day.

Across vegoils, the soybean complex continues to anchor strength. CME bean oil traded above 52 cents, supported by record NOPA crush and another major round of Chinese buying, with COFCO booking up to 14 U.S. soybean cargoes for Dec–Jan shipment. The renewed flow lifted BOPO and reinforced the divergence from gasoil-driven BOGO weakness. In Europe, rapeseed oil held firm at €1,090–1,095, supported by stronger Euronext and ICE canola. Sunflower oil remained static, with buyers unwilling to chase December offers above $1,350/mt CIF.

Palm oil added a thin layer of support but without confirming the urgency implied by headlines. Malaysian futures remained above 4,150 MYR/mt, helped by a weaker ringgit and firmer Dalian markets. Indonesia’s tightening grip on the plantation sector — including 3.7 million hectares under investigation or seizure — and the push toward B50 blending in 2026 continue to dominate discussion. Analysts estimate B50 could absorb 2.2 million tonnes of domestic palm oil. But the forward curve is not pricing an imminent export squeeze. POGO remains motionless around 326–330 through March 2026, offering no evidence that increased Indonesian blending is reducing export availability. The market is effectively saying: yes, Indonesia is tightening, but not yet. For now, the story remains medium-term bullish.

Beyond market pricing, structural developments in biofuels were also notable. In Brazil, Vale began field testing B30 and B50 biodiesel in 150-ton haul trucks and restarted trials of its 72-ton electric truck — a meaningful signal for future industrial-sector biodiesel demand. In Europe, Peninsula’s new 30,000-cubic-meter biofuel storage and blending facility in Rotterdam is now operational, expanding to 110,000 cubic meters in January. With ISCC certification and the ability to blend B5 to B100 marine grades, ARA is gaining vital downstream infrastructure ahead of 2026 regulatory tightening.

In the U.S., the EIA’s latest Short-Term Energy Outlook kept 2026 renewable diesel and biodiesel production forecasts unchanged but cut SAF and other advanced biofuel projections, reducing expected 2026 output from 50,000 b/d to 40,000 b/d. Renewable diesel is still forecast to rise to 260,000 b/d, while biodiesel stabilizes at 90,000 b/d, effectively signaling a near-term plateau in U.S. growth. Not much news from EPA leaves D4 RINs without guidance.

The overarching conclusion is that energy structure is now fully dictating biodiesel pricing. With gasoil backwardation blowing out past +100/mt and heat cracks touching $52/bbl, the system has shifted into a high-stress regime. Storage economics have collapsed, refining incentives have flipped, and prompt barrels are being forced forward. As a result, biodiesel spreads are moving in violent daily swings as the market re-marks risk in real time.

We are now in a global distillate squeeze, and biodiesel is trading as an extension of that squeeze rather than as a pure feedstock story. Expect more volatility — and faster repricing — as liquidity thins into late November and middle distillates continue to lead the dance.