Jet Fuel Breaks First as Quarter-End Flows Distort the Barrel

Singapore diesel remains the anchor and continues to signal tightness. 10ppm gasoil is still at $238.23/bbl with cash differentials at $57.47/bbl, while jet sits at $218.14/bbl despite a sharp drop on the day. East west spreads remain near $70/mt. The physical distillate system remains tight. Jet fuel is now the clearest stress point. Even after today’s correction, Singapore jet at $218/bbl remains historically elevated, and European jet cargo values have recently pushed into the $1,500–1,800/mt range. Reports across multiple regions point to tightening availability, with some airports holding less than 20 days of supply and contingency routing already underway. Indonesia has introduced rationing measures and long-haul supply routes into Australia are already being flagged as unsustainable beyond April. This is a global constraint on middle distillates.

At the same time, today’s weakness in ICE gasoil is technical. Brent expiry and quarter-end positioning pushed April gasoil down $67/mt to $1,331.50. This is flow driven and does not reflect the tightening physical conditions in jet and diesel.

In ARAG, physical confirms that tightness. UCOME continues to trade at +215 over ICE gasoil with a range between $205 and $220, RME at +122 and FAME at +99. Using front month gasoil at $1,330/mt, flat prices are approximately $1,545/mt for UCOME, $1,452/mt for RME and $1,429/mt for FAME. Premiums held despite the selloff in futures, confirming that supply remains constrained.

Feedstocks are steady in Europe but weak globally. Dutch origin soyoil for May is €1,170/mt with forward values around €1,165–1,170/mt. Rapeseed oil remains €1,123–1,130/mt. However, FOB Paranagua soyoil premiums remain deeply negative between -1150 and -1450 points depending on timing, confirming that global supply is long and export pressure is building.

In the US, the divergence between RINs and flat price economics continues. D4 RINs are at 1.802 and moving higher, yet biodiesel screen margins remain stable at 1.26 $/gal, or about $378/mt. Heating oil declined close to 3% across the curve and offset the RIN strength. The system remains highly profitable but is not tightening further.

Bean oil continues to hold relative strength on the board at 68.8 c/lb with strong gains over three months. BOGO spreads widened with front month at $314/mt and deferred above $600/mt - that is a huge contango structure. However, this strength is increasingly disconnected from global fundamentals as export markets remain under pressure.

EIA January data confirms the structural shift. Soybean oil use in biodiesel and renewable diesel increased 33% year on year, while total feedstock consumption declined by 2.27%. This is substitution, not demand growth. Tallow use dropped sharply due to EPA uncertainty, forcing the system toward soybean oil. This is temporary and will reverse once guidance stabilizes.

The USDA report reinforces the pressure on soy. Stocks remain high at 2.105 billion bushels while planting intentions came in lower at 84.7 million acres versus expectations near 85.5 million. That reduction is questionable given that soybeans require fewer inputs than corn and fertilizer costs remain elevated. Farmers are also sitting on large unsold soy inventories, which adds to the overhang. Fertilizer itself is now tightening again with NOLA urea reaching $700, approaching levels that historically shift planting decisions toward soybeans. This further challenges the lower soybean acreage number and suggests potential upside risk to planted area.

Across the barrel, divergence is now extreme. Naphtha cracks are at $467/mt over Brent with backwardation at $137/mt, showing tightness in petrochemical feedstocks. Fuel oil remains weak with VLSFO around $839/mt and HSFO cracks near parity. But jet fuel is now leading both in price and in availability.

Maritime risk remains elevated with the Strait of Hormuz still classified at a critical threat level and tanker flows heavily constrained and skewed. Transit volumes remain well below normal and positioning activity dominates actual flow. This continues to underpin the tightness in distillates.

The key takeaway is that today’s move is technical, driven by expiry and quarter-end positioning. Singapore diesel and jet fuel confirm tight fundamentals, ARAG premiums confirm physical scarcity, and biodiesel margins remain strong. At the same time, global feedstocks remain long and substitution toward soybean oil is masking the imbalance.

The system is short distillates and long feedstocks. Jet fuel is breaking first. If shortages continue to escalate, the pull on diesel will increase and biodiesel will be required to fill the gap. That will support biodiesel flat prices. However, the continued oversupply in soybean oil and deeply negative Paranagua premiums leave the current structure vulnerable, especially once tallow returns.

Nothing encapsulate better the current situation than diesel prices at the pump in the US!