RINs Rising While Sanctioned Barrels Flood Global Energy

EPA confirmed it is sending new biofuel blending mandates to the White House with finalization expected by the end of March. At the same time, Washington is reviewing a shift back to gallon based RVOs and the potential removal of the 50 percent reduction in RIN generation for foreign producers.

On paper, both changes are bearish RINs. Gallon mandates reduce compliance flexibility. Restoring full RIN eligibility for imports increases potential qualifying gallon supply. Yet D4 RINs continue to rise. June traded near 1.59 and December near 1.61, both higher on the day. The market is signaling that domestic production remains insufficient relative to forward mandate expectations, even with higher 2026 RVOs under discussion.

LCFS credits are reacting differently. The expected reopening of the import channel is pressuring West Coast balances. The divergence between firm D4 RINs and softer LCFS reflects two different supply risk assessments. National compliance remains tight. California is pricing incremental imported barrels.

In Northwest Europe ARAG, physical barge trading remained calm. RME traded at 1371 dollars per metric ton. FAME0 traded at 1315 dollars per metric ton, leaving a narrow 56 dollar spread. UCOME traded at 1396 dollars per metric ton, only 25 dollars over RME. UCOME versus FAME0 sits near 81 dollars per metric ton. HVO Class II was assessed at 2562 dollars per metric ton with no window trades. SAF held at 2241 dollars per metric ton. These are compressed spreads, not scarcity signals. Biodiesel pricing is tracking feedstock alignment and gasoil structure rather than showing independent strength.

Gasoil is the dominant variable. March versus July backwardation widened sharply to plus 46.25 dollars per metric ton from plus 27 dollars on February 16. July versus December sits at plus 25 dollars per metric ton. The front of the curve is tight. The back is materially less so. This structure invites prompt selling into Europe and encourages arbitrage from Asia and the Atlantic Basin.

Screen cracks reinforce the distortion. ULSD heat crack sits near 46 dollars per barrel while the 3:2:1 crack is closer to 28 dollars per barrel. Gasoline cracks in Asia remain depressed near 7 dollars per barrel. Refiners are incentivized to maximize distillate yield and run hard.

Layer in the sanctioned crude dynamic. Roughly 300 million barrels of Russian oil are reported on the water and another 200 million barrels of Iranian oil is accumulating offshore. These 1/2 Billion barrels are largely flowing to China and India for refining. Higher refinery runs in Asia to process discounted crude will increase output of both distillate and residual fuel. Strong heat cracks encourage maximum middle distillate recovery. At the same time, higher crude throughput mechanically increases HSFO supply.

Incremental distillate from Asia will look for premium markets. When European prompt gasoil backwardation trades at plus 46 dollars per metric ton, that is a direct signal. The front of the curve is inviting barrels. This shape is unstable. If Asian exports accelerate, the prompt premium will face pressure.

Soybean oil continues to reflect domestic policy more than global abundance. Paranagua FOB premiums remain deeply negative, with forward indications around minus 1000 to minus 1200 against futures. U.S. screen biodiesel crush margins are positive in March but negative by roughly 15 to 25 cents per gallon in May and July even with D4 RINs above 1.50. That means Chicago soyoil is already pricing policy support. Without elevated RIN values, forward biodiesel margins deteriorate quickly.

The system is not short crude. It is reallocating crude. Sanctioned barrels are redirected east. Asian refiners run hard. Distillate and HSFO output increases. Europe prices prompt tightness. Washington debates structural changes to RVO design. RINs rise despite textbook bearish signals from potential import normalization and reduced compliance flexibility.

This is a market driven by policy, logistics, and curve shape rather than pure supply deficit. With nearly half a billion barrels on water and prompt gasoil backwardation at plus 46 per metric ton, volatility remains the base case for biodiesel economics.