Ready for a Quiet Weekend? Distillate Curves Relax as Hormuz and FX Risk Build

August heating oil expired with a spread of less than 3 cents/gal over September, while September/October held near +13.54 cents/gal. ICE gasoil repeated the pattern. August/September closed at +$71/mt and August/December at +$252.75/mt, down 12.47% on the day from the recent +$288/mt high. The front end lost heat, yet the structure remains severe. August gasoil settled near $1,270/mt versus December near $1,018/mt, the heat crack stood at $88.48/bbl and the 3:2:1 crack at $63.13/bbl. This looks like expiry compression, not a repaired distillate balance. Gasoil still sitting way above 20 day wdma.

European biodiesel rose with energy, but the physical window did not confirm a new buying wave. The July 31 window carried RME, FAME0 and UCOME premiums near $375, $242.50 and $447.50/mt, with no trades in those three grades. HVO Class II printed at a $1,160/mt premium. Month averages stood at $1,514.45/mt for RME, $1,475.98/mt for FAME0 and $1,604.05/mt for UCOME. Spot flat prices remain supported by gasoil, while underlying biofuel liquidity stays thin. Chasing the outright price without renewed prompt gasoil widening leaves poor risk-reward.

US biofuel economics improved even as soybean oil weakened. September soybean oil fell 1.41% to $1,482.81/mt and was down 6.04% over three months. The nearby bean-oil-to-gasoil ratio was down 22.33% over the same period, while front BOGO fell to +$210.48/mt, down 60.71%. December 2026 D4 RINs held at $2.163 despite a 1.03% daily decline, and December 2027 stood at $2.209. Screen biodiesel crush values for renewable diesel were up 231% to 259% over three months, versus 62% to 94% for conventional biodiesel. New-crop soybean sales reached 1.333 million mt and 16.5% of USDA’s annual forecast, both four-year highs, yet soybean oil export sales were zero for new crop and negative 1,100 mt for old crop. Bean demand is firm. Oil remains the weak leg trading now below 20 dwma, which supports biodiesel and RD margins. Is Soybean oil telling us something is about to shift in energy? would watch this carefully as oilshare fell below 52%.

Soyoil

Asian feedstocks weakened into month-end. September CPO closed at $1,148.75/mt, down 0.69%, while Q4 CPO finished at $1,162.75/mt. Malaysia’s July palm exports reached 1.60 million mt, up 19.51% month on month, but Q4 BOPO dropped 7.83% to +$304.54/mt. POGO stayed deeply negative in August at minus $104.91/mt and near flat in September at minus $18.46/mt, then turned positive to +$120.01/mt for Q4 and +$178.38/mt for December. Near-term Indonesian blending economics have improved, but the curve still points to renewed subsidy pressure from October onward. European HEFA-SPK closed near $1,105/m3 against a July average of $1,142.95/m3, while HVO II remained near $2,820/mt. The pricing still reflects a compliance-cost problem rather than a shortage signal.

The weekend is less quiet than the expiry screens suggest. DXY broke below 100 to 99.785 and fell 1.50% on the week despite higher capital-market rates. The New York Fed reportedly asked banks for an EUR/JPY rate check, a warning of intervention risk rather than confirmation of action. The yen traded near 158.42 and the RMB near 6.772 per dollar. A Hormuz traffic chart showed only five vessel crossings against a 2021-2025 average of 37.6, while a report attributed to the IRGC said passage now requires Iranian permission. My bias is to treat Friday’s drop in backwardation as a reset, not the end of the squeeze. The recent +$288/mt gasoil August/December high remains the upside reference if traffic stays impaired. A move below +$220/mt would weaken the thesis. Front BOGO at +$210.48 has already completed most of the collapse from above +$400, so the call for April lows remains directionally sound, but the risk-reward is less asymmetric now.

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