Massive Distillate Futures Liquidation after-hours on US Unilateral Cease Fire

The market reversed sharply following the announcement of a two week ceasefire and willingness to engage on Iran’s 10 point proposal. Crude sold off with Brent down about 13% to near $95/bbl, largely in after hours, while ICE gasoil collapsed by roughly 20%, falling from above $1500/mt to $1213/mt. This is a distillate led liquidation. The structure that priced scarcity is being unwound faster than the underlying fundamentals.

Yet the physical system shows limited change. EIA data indicates disruptions previously near 7.5 mb/d in March with projections close to 9 mb/d into April. That level of disruption is consistent with a tight system, not a normalized one.

In Northwest Europe, window activity confirms that physical biofuels are not reacting to the paper selloff. UCOME traded between +75 and +82 over ICE gasoil. FAME traded between -65 and -50. The spread remains near +130/mt. One HVO class IV deal printed at 1345. Premiums held despite a $300/mt collapse in gasoil after hours. We will have to wait until tmrw to see how Biodiesel reacts.

Feedstocks remain firm. Dutch soyoil is 1175 eur/mt for May and 1170 for June. Rapeseed oil is 1150 for April and 1130 for May-July. Palm oil is at 4812 ringgit/mt. CME soybean oil is 69.72 c/lb or about $1537/mt. Oilshare is at 52.8%, a record. The complex is clearly oil led.

In the US, there is no confirmation of weakness. D4 RINs are at 1.80. Heating oil is down 13% to 3.88 $/gal. Bean oil holds at $1537/mt. BOGO is around $415/mt. Compliance value remains elevated and continues to support the system.

US retail data shows the same pattern. Diesel at the pump is $5.646/gal versus $5.454 a week ago and $4.510 a month ago. Gasoline is $4.14/gal, up from $3.41 a month ago. Prices remain elevated despite the futures selloff tonight.

In Asia, the divergence inside the barrel is clear. Singapore 10ppm is $254/bbl, down $12/bbl. Fujairah 10ppm is $232/bbl, down $21/bbl. Yet jet fuel is strengthening. Singapore jet is $227/bbl, up $1.63 on the day. Middle East Gulf jet is $222/bbl, also up. Regrade remains positive at +$3 to +$4/bbl. Refining margins are still near $70/bbl. Aviation demand and supply constraints remain intact.

Soybean flows reinforce the structural tightness. Brazil exported 23.5 mmt Jan-March, up 6%. China took 16.2 mmt, down 5%, only 69% of flows. Total Jan-Aug sales to China are 43.8 mmt. More volume is moving outside China, tightening global availability.

Policy continues to anchor demand on Biodiesel. Malaysia is producing about 975,000 tons versus 2.36 million tons capacity and is moving toward higher mandates especially considering low POGO levels. Indonesia remains at B40 with plans for B50 once they figure out that POGO is at +47.50 for June making blending Biodiesel more affordable but will it remain so?

We see the same patterns in South American with Biodiesel blending - the trend is higher mandates.

The contradiction is now explicit. ICE gasoil is down 20%, heating oil down 13%, yet D4 RINs are 1.80, BOGO is above $400/mt, oilshare is 52.8%, UCOME premiums are unchanged, Singapore diesel is still $254/bbl, jet fuel is rising, and US retail diesel is $5.646/gal. Physical markets are not yet confirming tonight paper move.

We are effectively in week 6 on sentiment, but the system is behaving like week 3 to week 4. There is no evidence yet of demand destruction, no evidence of normalized flows, and no collapse in physical premiums.

The next 7 to 10 days remain decisive despite nothing having truly changed on the Hormuz end. If the ceasefire holds and flows normalize, the paper move will be validated. If tensions resume, the market snaps back into a system that was pricing close to 9 mb/d of disruption. With jet fuel already diverging and refining margins still near $70/bbl, downside appears limited while upside risk remains asymmetric. Biofuels remain structurally supported for now because of higher mandates and constrained supplies of diesel and as I have said before Vegoils are the weakest link of distillates and will come down hard if a peace agreement is formalized.