Golden Week Weakness, Paper Spreads, and RINs Lift — A Market Waiting for a Trigger

Golden Week holidays began across China and much of Asia, weighing on sentiment as gasoil structure softened despite Russia extending gasoline export bans and partially restricting diesel and gasoil flows. The China holiday stretches over seven days, reducing regional trading activity and demand visibility. ICE gasoil Oct/Apr fell $20/mt to +49, while Oct/Dec slipped $10/mt to +19.75 compared with Friday’s close. The muted reaction underscores how Asian liquidity and demand concerns outweigh Moscow’s headlines.

In Asia, Chinese refiners continued to market October diesel and jet fuel cargoes, while Vietnam’s Petrolimex tendered for mid-October gasoil. Gasoil crack margins slipped to $21.6/bbl, but 10ppm cash premiums held at $1.20/bbl, showing demand resilience even as trading thinned during the holiday period.

In Europe, activity was concentrated in RME and F0, while UCOME saw no physical trades. Nevertheless, the UCOME/RME spread widened to +55, a move seemingly driven by paper rather than fundamentals. HVO Class 2 finally traded at $2,579.48/mt, leaving it at a $144.20 discount to SAF. SAF pricing at these levels was largely a function of refiners and traders, but remains unsustainable given the lack of real uptake.

In the US, the government shutdown went ahead as expected, but D4 RINs saw a sharp bounce. Dec 2025 moved from $0.97 to $0.99/gal, while Dec 2026 climbed to $1.05. The latest EIA data shed light on why: July feedstock consumption for biofuels was down 14.5% year-on-year. Soybean oil use declined just 2.8%, but canola oil collapsed 149% amid tariff and seasonal pressures. Tallow surged to 28% of the feedstock mix, up nearly 20% versus last July. The tilt away from vegetable oils toward animal fats does not reduce RINs generation per se, since both classes generate credits, but under a Producer Tax Credit carbon intensity framework, the quality of production matters more than the blending side. This disfavors soybean oil and supports the growing role of lower-carbon intensity feedstocks such as tallow.

Looking ahead, the government shutdown is unlikely to drag on much longer. Given the geopolitical backdrop, a fully functioning government will be required, making it doubtful the standoff stretches past next week. On the charts, ICE gasoil appears stuck despite the 20-day WDMA crossing above the 50-day back in early August. The same technical stasis is visible in soybean oil. In my view, we are at a pivot point that will resolve within the month—either with a sharp rally or a steep drop. My bias leans toward the latter.

Contrary to the textbook view that distillates see seasonal support into Q4, that has not been the reality in recent years. More often, Q4 acts as a period of heightened volatility rather than steady strength, with direction decided by whether demand shocks or supply disruptions materialize. With Asian demand sidelined by holidays, European spreads looking paper-driven, and US feedstock dynamics pointing away from soybean oil, the balance of risks tilts to the downside for BOGO. A sharp rally from here would almost certainly need to be geopolitically driven, not seasonal, underscoring that the heavier bias remains lower.