Heating Oil Rally Lifts Sentiment, but Biofuel Markets Stay Cautious

The first week of November opened quietly, with physical trading in ARAG still muted. RME settled at +$724.96/mt, FAME 0 at +$616.50/mt, and UCOME at +$801.67/mt, leaving spreads at RME/FAME +$108 and UCOME/FAME +$185. HVO Class II $1,356.50/mt tracked firmer ICE gasoil $724/mt, keeping margins stable but narrow.

Despite talk of softening cracks, gasoil Nov/Apr backwardation remains steep at +$63.50/mt, signaling ongoing tightness in prompt distillate supply. The structure’s strength shows refiners are still short of nearby barrels, even as inventories slowly rebuild. Traders are reluctant to unwind positions ahead of the winter heating season, keeping volatility subdued but the underlying tone firm.

In the U.S., D4 RINs nudged higher to $1.008/gal, helped by firmer heating oil and cautious optimism that the government shutdown standoff could soon be resolved. Congressional negotiators are working toward a temporary funding extension, which would allow the EPA to resume pending rulemaking and 45Z guidance. That possibility has lent some support to market sentiment after several weeks of hesitation.

Soybean oil futures rebounded modestly, with CBOT December at 49.68¢/lb, though the Dec/May carry remains wide at –1.23¢/lb. The contango highlights an imbalance between abundant nearby supply and sluggish export demand. Crushers continue to prioritize meal output while pushing oil forward, a pattern that mirrors the broader global shift in trade flows toward South America.

This shift has become structural. Brazil’s record 177 Mt crop, combined with expanded port capacity at Barcarena and Itaqui, is reshaping the global oilseed trade. China’s incremental demand growth is now almost entirely met by South American exporters, while U.S. shipments have fallen by roughly 10% year-on-year. Argentina’s crush industry—buoyed by a weaker peso and improved domestic economics—is regaining market share after years of underperformance. Together, Brazil and Argentina now supply over 70% of global soybean exports, compared to about 60% a decade ago.

For biodiesel, this shift matters because it also redirects feedstock availability. South American soy oil output increasingly serves both local blending programs and export demand to Asia and Europe, while the U.S. uses more of its own oil internally for renewable diesel. The result is a gradual reorientation of feedstock flows—Brazil and Argentina setting global availability, Europe and the U.S. adjusting around them.

Meanwhile, Europe’s focus this week is squarely on Germany’s RED III vote, which will determine how the bloc’s largest fuel market implements the updated Renewable Energy Directive. The decision will set precedents on double-counting of waste-based feedstocks, alignment of national GHG quotas with EU-wide 2030 targets, and treatment of co-processing and SAF within compliance frameworks. A stricter stance could tighten the availability of eligible feedstocks and raise certificate demand, while a softer transition could prolong today’s oversupply of lower-carbon biodiesel. Traders see this as the most consequential policy signal for the European biofuels market heading into 2026.

In Northwest Europe, soft oils remain heavy: Dutch RSO €1,110/mt, soy oil €1,095/mt, and sunflower oil $1,350/mt FOB N. Europe. The BOGO spread firmed slightly to +392, tracking soy oil’s bounce, but oil share remains subdued near 43%.

Overall, the tone as November begins is one of cautious stability—energy prices remain firm, RINs are recovering, and soybean oil is stabilizing. Yet structural shifts in trade, policy uncertainty in Europe, and lingering contango in the U.S. soy complex suggest the market is not out of the woods. The South American supply dominance and Germany’s RED III outcome now stand as the two compass points likely to define biodiesel direction into year-end.