Germany Delivers Clarity; the U.S. Tries to Catch Up
Europe enters a structurally tighter phase as Berlin prepares to approve the long-delayed RED III transposition, ending months of subdued engagement across physical and paper markets. The expected package — ending double-counting for advanced wastes as we predicted for last 6 months, maintaining the 2027 timetable for phasing out palm by-products, delaying non-EU audit requirements to 2027, excluding aviation and maritime from the obligation, and lifting the GHG reduction target to 16% — recalibrates the European renewable-fuel balance for 2026 and beyond. It removes distortions created by heavily discounted double-countable molecules, restores predictable demand for FAME and HVO, and realigns policy with blend economics. German fundamentals have been signaling this shift for weeks, with rapeseed oil steady in a narrow €1,065–€1,075/mt range, biodiesel incorporation near 7.3%, and no stress despite softer diesel use. The ARAG window finally reflected renewed depth, with RME and UCOME trading in the mid-$1,450s–$1,460s/mt and HVO class 2 and SAF sustaining levels above $2,200/mt and close to $2,400/mt. A firmer ICE gasoil curve into expiry — Dec/Apr around +27.25 as shorts were forced to cover — lifts the energy floor under biodiesel values. Europe is now the only region presenting a fully coherent alignment between legislation, physical markets and diesel structure.
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