RINs Flinch, Margins Hold, Feedstock Stays Sticky

D4 RINs finally stopped their unrelenting climb today, and the timing is difficult to ignore. AFPM has filed a petition in the U.S. Court of Appeals for the D.C. Circuit challenging EPA’s final rule setting the 2026 and 2027 RFS volume requirements. The petition is not yet a full legal brief, but it preserves AFPM’s right to seek judicial review. That was enough to make the market pause. Dec26 D4 RINs traded at 2.408, down 0.918% on the day, while Dec27 was shown at 2.441, down 1.374%. The intraday chart showed Dec26 D4s breaking from about 2.43 toward 2.39 before recovering. This is not a bearish RIN move yet. It is a sign that refiners have finally introduced legal and political resistance into a market that had been pricing RFS compliance as if EPA had no constraints.

That pause in RINs came as soybean oil corrected hard. July soybean oil fell 2.13 cents to 74.16 cents/lb, down 2.79%, while August fell 1.99 cents to 73.16 cents/lb and September lost 1.84 cents to 72.23 cents/lb. In $/mt terms, July soybean oil fell $48.06 to $1,633.83/mt, September fell $41.45 to $1,591.50/mt and December fell $32.19 to $1,560.64/mt. BOPO also came off sharply, with July down $46.96 to $477.18/mt and September down $40.56 to $419.88/mt. BOGO softened but stayed extremely high, with July still at $596.59/mt, September at $602.46/mt and December at $644.68/mt. The message is clear: the policy panic premium eased, but the U.S. soybean oil market is still carrying a large RFS-qualified scarcity premium.

Energy also corrected, but diesel remains strong enough to support biodiesel and renewable diesel economics. July WTI fell $2.84 to $90.20/bbl, while August Brent fell $2.03 to $90.84/bbl. ICE gasoil sold off as well, with June down $31.00 to $1,048.50/mt and July down $27.50 to $1,035.25/mt. Even after that correction, June gasoil is still up 23.72% over three months and July is up 28.36%. Soybean oil fell faster than diesel today, which helped the screen. July bean oil as a percentage of gasoil eased to 1.5790, while September eased to 1.6108. The renewable diesel crush improved 10.18 cents to 55.70 cents/gal for July, while the conventional biodiesel crush improved 8.00 cents to 105.71 cents/gal. In other words, today’s correction in soybean oil did not destroy biofuel margins. It improved them.

Europe told the same story in a different way. Product values were lower, but gross margins remain positive where feedstock access is tightest. Spot RME settled at $1,568/mt, FAME 0 at $1,466/mt, UCOME at $1,601/mt and HVO II at $2,831/mt. UCO ex-works Netherlands was unchanged at $1,130/mt, while UCO CIF ARA was unchanged at $1,180/mt. That leaves a UCOME gross margin of roughly $421/mt versus CIF ARA UCO, or $471/mt versus ex-works Netherlands UCO. RME was much thinner, with RME at $1,568/mt against RSO at €1,298/mt, or about $1,507/mt using EUR/USD at 1.1612, leaving about $61/mt. The important signal is that UCOME corrected by $41/mt, but UCO did not move. Product softened, feedstock stayed sticky, and Europe is not giving a bearish signal on waste-based biodiesel economics.

The ARA window also remained active. Month-to-date values showed RME at $1,568.13/mt, FAME 0 at $1,497.94/mt, UCOME at $1,631.04/mt and HVO class II at $1,320/mt over gasoil. Paper activity was healthy for a Friday, with 66 kt of FAME, 50 kt of RME/FAME, 18 kt of UCOME/FAME, 15 kt of HVO II and 18 kt of HVO IV/HVO II trading, or 171 kt across the reported biofuels contracts. That volume matters because it tells us the correction was not just a screen event. The market is still repricing around strong diesel, high RINs, sticky waste feedstock and policy uncertainty.

Palm remains the policy wild card, but it has not turned into a cash squeeze yet. Indonesia has issued a regulation bringing exports of strategic commodities under centralized state control. The first phase includes palm oil, coal and ferroalloys, with broader commodity exports expected to move through the state firm after December 31. That adds execution risk, especially if exporters slow shipments while the mechanism is clarified. Yet the nearby palm market has not confirmed a bullish disruption. August BMD CPO fell 1.6% on June 4 to MYR 4,602/mt, or about $1,118/mt. June CPO was offered around $1,215 to $1,220/mt FOB Indonesia, with bids near $1,205/mt. Malaysia’s May balance also looked heavy, with inventories expected up 2.2% to 2.36 million mt, exports down 6.2% to 1.22 million mt and production down 4.9% to 1.55 million mt. Buyers, especially India, appear covered enough to resist chasing replacement supply for now.

That is why the palm policy story needs to be treated carefully. Centralized export control in Indonesia is bullish optionality for palm and for global vegetable oils, but it is not yet a nearby physical squeeze. India still sees soybean oil CFR West Coast India around $1,283 to $1,293/mt for July, while CPO CFR West Coast India was indicated around $1,236.75 to $1,246.75/mt. The spread keeps soybean oil above palm into India, but it does not show panic buying of Malaysian palm. The risk is forward execution, not immediate shortage. If Indonesia’s new system slows exports in September or into year-end, then the market will have to reprice. Today, it is still trading weak rival oils, profit-taking and covered buyers.

European soft oils also argue against a simple shortage narrative. Dutch-origin soybean oil was quoted at €1,105/mt FOB for June and July, down €25/mt on the day. Dutch-origin rapeseed oil was €1,370/mt for June, unchanged, and €1,260/mt for July, down €10/mt. The more interesting point is forward acreage. German 2026 crop rapeseed forward prices were shown near €492/mt ex-farm at the end of May, while soft wheat was near €184/mt. That puts the rapeseed-to-wheat ratio at 2.7, up from 2.4 at the start of January. At that ratio, rapeseed remains the better crop rotation option for German farmers. This does not cap nearby rapeseed oil, but it argues against assuming structural EU rapeseed scarcity into 2027 unless weather damages the crop.

The global soybean flow remains large. Brazil exported 14.8 million mt of soybeans in May, up 5% from last year, with 71% bound for China. Another estimate put May exports at 15.42 million mt, up 8.7% from 14.18 million mt last year, with January to May exports at 58.51 million mt versus 54.26 million mt last year. China reportedly took around 70% of those shipments. That keeps China well supplied with soybeans, but it also keeps crush running and keeps soybean oil available outside the U.S. RFS island. The U.S. market is still priced around qualified feedstock scarcity. The global market is still saying there is enough vegetable oil.

The U.S. biofuel data support the idea that production is recovering, but not fast enough to remove the stress. April biomass-based diesel RIN generation improved, with domestic BBD RIN generation up 7% month on month and 18% year on year. Domestic biodiesel RIN generation rose 10% month on month and 28% year on year, while domestic renewable diesel RIN generation rose 5% month on month and 13% year on year. March feedstock data showed vegetable oil use rising by 439 million pounds to 1.686 billion pounds, led by soybean oil and canola oil. Soybean oil’s share of total feedstocks eased to 38.9% from 41% in February, while UCO fell to 9.5%, the lowest share since December 2020. That explains why UCO remains sticky. Waste feedstock is not moving lower because the system still needs low-CI molecules.

Today’s conclusion is straightforward. The AFPM lawsuit stopped the one-way RIN squeeze, but it did not solve the RFS compliance problem. D4s above 2.40 still create a major balance sheet issue for obligated parties. Soybean oil corrected, but the correction improved biodiesel and RD crush values rather than killing them. Europe’s UCOME margin remains healthy because UCO did not follow product lower. Indonesia’s palm export overhaul adds forward policy risk, even if nearby buyers are not chasing today. The market has moved from panic to resistance, but the underlying tension remains the same: high mandates, strong diesel economics, limited qualified feedstock and a global vegetable oil market that still looks much cheaper than the U.S. screen.