ICE Gasoil Breaks Lower as Biodiesel Spreads Flare

A sharp 2.5% drop in ICE gasoil today pushed BOGO nearly a full standard deviation higher to +481, underscoring renewed strain on biodiesel economics. The sell-off comes as oil majors and trading houses attempt to manage a temporary surplus of crude while refining margins remain historically high. According to executives from Vitol, Trafigura, and Gunvor, the current oversupply could persist into early 2026 before natural decline rates tighten the market again—leaving traders forced to clear excess crude through the diesel pool even as Asian middle-distillate cracks remain robust.

From a technical standpoint, the ICE gasoil chart looks dreadful on the monthly view, and even the weekly chart shows a clear gap lower, confirming strong downside momentum. The next major support now appears near $600/mt, a level last seen during the 2023 consolidation phase. This bearish setup compounds pressure on biodiesel margins and risk sentiment across the complex.

In the ARAG window, RME slipped again to $1,370/mt, while RSO in NWE was unchanged. Soyoil gained modestly, maintaining a €15/mt premium for RSO in Nov/Dec, while the back of the curve remains heavily discounted as traders anticipate winter inflows of seed from Ukraine, Canada, and Australia. POGO stayed firm at +426/mt, but such a high premium is increasingly difficult to sustain given Indonesia’s $375/mt export levy, which forces the government to cover the differential amid tight budgets and rising domestic discontent over the economy.

Across Asia, fundamentals remain tight. Hong Leong Investment Bank lifted its 2025 CPO forecast to RM 4,300/mt, citing La Niña risks, structural yield constraints, and Indonesia’s B40 programme, which has already absorbed over 2 million tonnes of palm oil domestically. Energy Minister Bahlil Lahadalia confirmed Jakarta is considering export restrictions and expansion of the Domestic Market Obligation to secure feedstock for biodiesel ahead of the B50 rollout in H2 2026, which would lift annual demand to 20.1 million KL (17.6 Mil MT).

Meanwhile, in the United States, weakness in heating oil mirrors the collapse in ICE gasoil, compressing gross biodiesel margins and adding pressure on RIN generation. The tighter margin environment has made D4 RINs the key stabilizer, with prices rising to 1.062 and Dec-26 up to 1.115. The ongoing government shutdown adds further uncertainty as administrative delays risk slowing RIN certifications and credit issuance.

All of this unfolds against a crucial geopolitical backdrop. China’s Communist Party Plenum (Oct 20–23) in Beijing will focus on finalizing the 15th Five-Year Plan (2026–2030), where Xi Jinping will need to emerge with a clear domestic “win,” likely on industrial self-sufficiency or energy security. Only days later, the APEC Leaders’ Meeting (Oct 31–Nov 1) in Gyeongju, South Korea, will gather regional heads, including Trump, in a highly visible forum. The contrast between Xi’s domestic consolidation and Trump’s return to the international stage adds tension to markets already on edge. Trade, energy policy, and currency management could be in focus as both leaders seek to project strength ahead of 2026.

Overall, the complex faces a convergence of headwinds—collapsing distillate futures, unsustainable palm subsidies, and slowing biodiesel margins—set against a politically charged backdrop. With $600/mt now the likely next support for gasoil and major summits looming, volatility in BOGO and POGO looks set to remain elevated deep into Q4.