Markets Test Limits as Geopolitical Volatility Reigns

The biodiesel complex faced an intense session to open the week as gasoil collapsed from an early high of $817.75/mt to $699/mt by day’s end—a nearly 8% drop. The sharp reversal caught many off guard and was reflected in BOGO, which fell 7% to +442. This kind of whiplash makes directional conviction difficult in the near term. ICE weakness, however, didn't prevent physical trades in ARAG, where UCOME barges cleared at $1,449/mt and RME at $1,452/mt, effectively narrowing the historical spread between the two. FAME 0, by contrast, appears theoretically priced at $1,409/mt, showing a near $50/mt discount to both.

Policy tailwinds continued to build over the weekend with new developments on Renewable Fuels of Non-Biological Origin (RFNBOs). A flurry of draft rules from Brussels, Westminster, and Washington has elevated the RFNBO conversation to the mainstream. However, regulatory architecture diverges sharply. As shown in the infographic comparison attached, the EU remains rule-based and strict—especially around additionality and geographic correlation—while the U.S. is moving rapidly under a market-based, incentive-driven regime via the IRA and Section 45V which is the most generous global hydrogen subsidy to date. The UK, meanwhile, straddles both camps. Despite the regulatory enthusiasm, RFNBO uptake remains nascent and years from mass adoption. In contrast, another molecule is already executing.

RFNBO Regulatory matrix

Renewable Natural Gas (RNG) is now the central workhorse of the compliance stack in the U.S. RNG can qualify for both D3 and D5 RINs depending on feedstock, is deeply monetized under California’s LCFS due to ultra-low CI scores (often negative), and is poised to play a leading role in 45Z tax credit generation. Under early IRS interpretations, RNG-derived fuels—especially when used in internal combustion vehicles or in e-fuel production—could earn credits under 45Z, provided they meet GREET thresholds and are produced domestically. While regulatory clarity is still evolving, RNG is the only feedstock presently nesting across RFS, LCFS, and 45Z simultaneously, giving it a structural advantage over emerging RFNBO schemes.

Biodiesel barge trading remained firm relative to the turmoil in energy futures. RME and UCOME traded at near parity, suggesting buyers were willing to pay up for compliance certainty despite volatility in gasoil and BOGO. Feedstock prices also remain elevated, especially for UCO, which continues to benefit despite German double-counting reforms under RED III that phase out double counting. This will come for a vote in the Bundestag in September. Gross margins for RME remain north of $200/mt, and FAME 0 continues to underperform at a $50/mt discount, but with value if backwardation intensifies. South American markets were calm as Friday was a public holiday in Argentina, but in Europe, soft oil dynamics remained front and center: soybean oil is now trading at nearly €100/mt premium to rapeseed oil, reinforcing margin pressure on rapeseed-based biodiesel.

Meanwhile, political noise continues to cloud visibility in the U.S. A weekend post by former President Trump denouncing green tax credits reignited uncertainty around the future of 45Z and 45V, even though current drafts in Congress keep both programs intact. D4 RINs held firm at 1.155, reflecting resilience in the face of inertia in Washington. Traders are beginning to price in higher structural RIN values should political gridlock delay any legislative tweaks, especially as feedstock restrictions and scoring requirements for foreign imports tighten heading into 2026.

For now, the market sits at the intersection of real-time geopolitical turbulence and slow-moving regulatory transformation. While e-fuels may dominate the headlines, RNG is quietly driving value beneath the surface—and the physical market is showing it knows where the real barrels are.