SAF Is Being Built in Asia, but Priced in Europe: Gasoil Firms, Malaysia Joins China, and Europe Remains the Only Real Demand Sink

Energy markets firmed modestly today, with distillates doing just enough work to lean on biofuel spreads without triggering a broader risk-on move. Gasoil was slightly higher, and that mattered mechanically: BOGO softened not because of weakness in bean oil, but because of the energy leg. Jan BOGO is now around +451, highlighting that recent compression has been driven by gasoil rather than vegetable oil fundamentals.

Geopolitics continue to provide a background bid. Tensions around Venezuela remain elevated, supporting crude without creating a full-blown supply shock. FX continues to send the clearer signal, with USD/RUB pushing back toward 80, a level that does not corroborate any meaningful progress in Russia–Ukraine negotiations despite occasional optimism being priced into parts of the energy curve.

One important cross-current remains the erosion of gasoline economics. Northwest European gasoline cracks have slipped toward $10/bbl, reinforcing the familiar configuration where gasoline leads the adjustment lower while distillates lag. Historically this setup does not persist for long. When gasoline margins compress to this level, refinery responses tend to tighten the middle of the barrel rather than loosen it, which helps explain why today’s modest firmness in gasoil occurred even as global distillate supply remains ample.

Vegetable oils were largely uneventful outright, but structure continues to matter more than direction. Bean oil remains soft on the futures leg, while basis shows resilience. In South America, Paranaguá soyoil premiums for new-crop Apr/May are firmer at around –450, a move driven primarily by weaker CBOT bean oil futures rather than a surge in physical demand. Futures are doing the work, while basis quietly stabilizes.

The ARAG barge window continued to clear on flat price, margin and curve discipline rather than directional conviction. RME barges around $1,490/mt still translate into gross margins near $198/mt, which keeps producer economics attractive but makes RME less compelling as a buy. With margins already elevated and the BOGO curve showing roughly –45 contango out to March, buyers are being paid to carry F0 barrels forward. That curve shape explains why RME screens rich despite healthy margins. By contrast, FAME 0 at roughly $1,310/mt remains the cheapest outright option in the window and therefore the more attractive barrel for participants unconstrained by GHG, while UCOME around $1,450/mt stays supported but struggles to widen further against gasoil.

HVO Class 2 remains fully segregated by price, continuing to clear at roughly $1,000/mt over UCOME. In contrast, SAF pricing in Europe is currently around $100/mt below HVO Class 2, despite both products being produced from the same plants and feedstock slate. The divergence reflects trade treatment rather than production economics, with HVO subject to countervailing duties while SAF currently is not.

In the U.S., policy inertia remains a drag rather than a driver. D4 RINs were essentially unchanged at 1.086, reinforcing that the domestic market continues to trade without a catalyst and that regulatory uncertainty, not fundamentals, is setting the tone.

The more consequential development sits in SAF supply. China is no longer just crushing for domestic balance but is becoming a structural exporter of renewable barrels, including SAF-adjacent molecules, and Malaysia is now clearly joining that trajectory. The country has confirmed it is on track to reach 1 million tonnes per year of SAF capacity by 2028, split between EcoCeres at 350k mt and a Petronas-led project at 650k mt, with policy explicitly aligned toward securing feedstock and enabling exports.

That intent is reinforced by upstream economics. For January 2026, Malaysia’s CPO export duty is set at RM 374.89/mt, based on a reference price of RM 3,946.17 and a 9.5% tax rate, equivalent to USD 91.75/mt at 4.0860. This represents a tangible friction on discretionary CPO exports and implicitly favors SAF and waste-based pathways.

Geography sharpens the contrast. Immediately adjacent sits Singapore, home to Neste’s large SAF and renewable fuels complex, one of the most advanced export hubs globally but also one operating at structurally higher cost due to tighter feedstock competition, higher operating expenses and logistics. Malaysia is positioning itself as the lower-cost SAF export platform on the curve, while Singapore remains the premium, capital-intensive end.

Asian distillate markets remain heavy. Diesel cash differentials are near six-month lows, refinery runs remain elevated, and surplus barrels are largely trapped regionally. Jet fuel may intermittently find arbitrage outlets, but SAF cannot. Policy, not logistics, dictates its destination.

Looking ahead, the market feels caught between weak near-term fundamentals and tightening structural constraints. The curve is not offering incentives to lengthen exposure, but gasoline-led weakness is unlikely to persist indefinitely without forcing refinery adjustments. If gasoil holds while gasoline margins remain compressed, the path of least resistance into early Q1 is for relative firmness in distillates and selective support for biofuel spreads rather than a broad selloff. Volatility may stay muted, but relative value and policy asymmetries are likely to remain the dominant drivers.