Markets End October in a Fog

The month closed quietly in the physical market, with almost no barge activity in the ARAG window. RME settled at +719 over ICE gasoil, while all other grades finished below their monthly averages. The stillness in the barge trade contrasted sharply with the paper market, where both FAME and UCOME contracts saw heavy end-of-month positioning. Week 44 volumes in Northwest Europe jumped more than 200% from last week, a clear sign of fund unwinding before November roll dates and Dec bean oil options expiry in 21 days.

Despite the implementation of new Russian sanctions, ICE gasoil trading was muted. The Nov/Apr backwardation narrowed 8% to +$62.50, suggesting either demand destruction or a serious underestimation of sanction effects. Reports from Bloomberg and RBC show Russian oil-product exports plunging to wartime lows near 1.89 million barrels per day, with Baltic port loadings sharply reduced following drone attacks and tighter U.S. and EU restrictions. Diesel exports ticked slightly higher, but naphtha and fuel oil flows collapsed, leaving Russia’s overall export revenue at its weakest since 2022. The question now is whether Europe’s product market has truly priced in that lost supply.

The larger macro picture only deepened the confusion. The U.S. Energy Secretary confirmed Washington is ready to sell more oil and gas to China if Beijing cuts Russian imports—a signal that trade policy, energy diplomacy, and sanctions are now pulling in opposite directions. Meanwhile, new sanctions on Rosneft and Lukoil, coupled with U.S. overtures to China, have created a fog of competing agendas that the market is struggling to read.

In North America, panic spread across the biodiesel belt as RIN values fell below $1.00 amid frustration over the EPA’s continued delays in clarifying 45Z and reallocation rules. Industry groups including the Clean Fuels Alliance America and Renewable Fuels Association urged the EPA to fully reallocate 100% of waived RFS volumes, warning that anything less would further depress RIN prices and risk “catastrophic” demand destruction for biodiesel and renewable diesel producers. Ironically, while regulatory paralysis weighs on sentiment, the screen crush margin has quietly recovered from mid-October lows and now sits around –26 ¢/gal with D4s at 0.99—its best showing in two weeks.

The real market mover today, however, was BOGO, which collapsed more than 5% to +371, tracking the sharp 2% drop in CBOT soybean oil to 48.68 ¢/lb. Oil share fell to 43%, breaking below its end-May low and putting the next support near 40%. That shift erased much of the feedstock premium that had not supported biodiesel margins earlier in the month. Carrying charges in soyoil have not stopped widening to historical levels with Dec/Mar settling at -0.94 and Dec/May at -1.32.

For now, traders face a paradox: Russian supply is shrinking, sanctions are deepening, but gasoil prices refuse to react. Paper liquidity spiked, physical trade froze, and policy direction on both sides of the Atlantic remains uncertain. The result is a market closing October exactly as it began—volatile in theory, stagnant in practice, and waiting for clarity that never seems to arrive.