Hormuz Weekend Risk Meets Empty Product Tanks

The market is no longer trading a clean Hormuz reopening. We are going into the weekend with vessels hit, diverted or turning back near the Strait, while energy screens are repricing the risk of another interruption. Brent Sep traded up $4.63 to $78.79, WTI Aug up $3.69 to $74.13, heating oil Aug up 40.52 cents to $3.7069/gal, and ICE gasoil Nov surged $113.25 to $1,086.50/mt. The key number remains the gasoil Nov-Dec spread at $181.25/mt, up $38.75 on the day. That is no longer a flat-price story. It is a product structure saying prompt barrels matter again.

ICE Gasoil Jul/Dec

U.S. inventories explain why the market is so sensitive. Gasoline stocks are at 212.1 million barrels, down 17.4 million barrels from last year. Distillate stocks are at 103.6 million barrels after a 5.0 million barrel weekly draw. Jet fuel stocks are at 47.6 million barrels. Combined gasoline, distillate and jet fuel storage is close to 363.3 million barrels, about 13.2 million barrels below last year and still sitting near the bottom end of the five-year range. In this setup, RINs are not the first problem for this Administration. Physical fuel availability is.

I need to correct yesterday’s RIN framing although my point doesn't change, we are not generating enough RINs. The 1.5x equivalence value is correct for conventional FAME biodiesel, but it is not the right 2026 lens for renewable diesel. In 2026, FAME biodiesel still generates 1.5 RINs per gallon while non-ester renewable diesel still generates 1.7 RINs per gallon. At a Dec D4 value of 2.567, that means about $3.85/gal of RIN value for FAME and about $4.36/gal for RD. Using our normal density assumptions, that is roughly $1,156/mt for FAME and $1,537/mt for RD. The 2027 rule change matters because RD moves to a 1.5x default equivalence value, with a petition route toward 1.6x for qualifying production rather than a guaranteed 1.7x. At the same D4 price, the move from 1.7x to 1.5x removes about $0.51/gal, or roughly $181/mt, from RD RIN value. That is not a good outlook when you need to generate more RINs.

The current U.S. screen still points toward stronger biomass-based diesel economics. Aug conventional biodiesel crush improved to $1.5958/gal, up 20.52 cents on the day, while Aug RD crush improved to $1.1480/gal, up 18.30 cents. Soy oil rallied hard, with Aug at 70.85 cents/lb, up 2.26 cents, and Dec at 69.52 cents/lb, up 2.25 cents. Yet energy rallied harder. Aug bean oil as a percentage of gasoil fell 7.21%, and Aug BOGO dropped $67.93 to $495.21/mt. That is the key trading point. Soy oil is supported by crude, weather and China chatter, but gasoil is now moving faster. Lower BOGO, strong D4s and stronger distillate cracks all improve the pull for biodiesel and RD.

NWE activity remained active but less broad than the prior week’s spike. European spot settlement values put RME near $1,471/mt, FAME near $1,469/mt and UCOME near $1,575/mt. The window showed month averages of $1,479.91 for RME, $1,442.39 for FAME 0 and $1,576.56 for UCOME. Today’s window included RME at a 405 premium, FAME 0 around 360 to 365, UCOME at 500 to 510 and HVO II between 1,150 and 1,300 premium. Paper volumes have cooled from Week 26, with Week 27 near 199 kt across RME, FAME 0, UCOME and HVO II versus roughly 548 kt the prior week. Today’s EOD paper totals still showed 21 kt RME, 19 kt FAME, 30 kt UCOME, 20 kt UCOME/FAME and 9.9 kt HVO II.

Bottom line: this is a dangerous weekend setup for biodiesel and RD traders. The RIN correction matters because RD carries a 1.7x EV in 2026 and faces a lower baseline in 2027. But the larger immediate issue is physical product risk. U.S. product tanks are thin, gasoil backwardation is back near crisis levels, and Hormuz is again one vessel incident away from another repricing. The marginal gallon of biodiesel and RD is worth more today because the diesel barrel is worth more, the RIN remains high, and the market is paying for speed.