SAF Meets the Energy Security Test, While Bean Oil Keep Pulling RINs Higher

Today’s biodiesel market is no longer trading a simple feedstock story. July ICE gasoil rallied $55.25/mt, or 5.22%, to $1,113.25/mt, while June gasoil rallied $58/mt, or 5.41%, to $1,129.75/mt. WTI July was up $2.49/bbl, or 2.66%, to $96.25/bbl, and Brent July was up $2.20/bbl, or 2.29%, to $98.20/bbl. This matters directly for biodiesel and renewable diesel because the distillate barrel is carrying the market again. The move is not only geopolitical. U.S. crude inventories excluding SPR drew 7.974 million barrels, SPR drew another 7.993 million barrels, and total crude inventories including SPR drew 15.967 million barrels. Cushing stocks are down to 22.441 million barrels, close to the lower end of the range seen since 2017. Gasoline inventories are also near the low end of the seasonal range at roughly 212 million barrels. China is drawing crude stocks as well, with onshore inventories falling from the May highs near 1.25 billion barrels toward roughly 1.23 billion barrels as high prices curb imports. The July gasoil structure remains tight, with June/September gasoil at +$87/mt and June/December gasoil at +$179.75/mt. At the same time, Indian diesel demand is already showing stress from high prices, with diesel prices up 8.6% since mid-May, gasoline prices up 7.8%, and May diesel sales only 0.9% higher year-on-year versus gasoline sales up 2.8%. This is the tension traders need to focus on: inventories are drawing, curves are tight, and flat prices are starting to ration demand. US is not too far behind on gasoline.

The U.S. biodiesel screen looks explosive because D4 RINs remain near 2.415. July soybean oil was marked at 79.04 c/lb, equivalent to $1,742.74/mt, up $14.11/mt on the day and still 25.6% higher over three months. Even with soybean oil at this level, the renewable diesel crush improved to 41.33 c/gal for July, up 10.54 c/gal on the day, while the conventional biodiesel crush improved to 96.22 c/gal, up 11.18 c/gal. This is without 45z or LCFS credits. The soybean crush margin also remains above $4/bu, equivalent to roughly $147/mt of soybeans, which should already incentivize crushers to run hard. Yet July/December soybean oil remains at +4.75 c/lb, with July at 78.95 c/lb and December at 74.20 c/lb. This is a strong physical signal. The market is already paying crushers to run, but the front-end soybean oil premium remains intact. In other words, the market is still asking for more nearby soybean oil.

The more important signal today is that the arbitrage pressure is becoming harder to ignore. July BOGO remains extreme at +$629.93/mt, while July BOPO is still around +$586.77/mt. Even after gasoil rallied faster than soybean oil today, Chicago soybean oil remains priced far above global replacement values. The point we have been making remains valid: the U.S. is trading domestic RFS scarcity, not the global vegetable oil market. Today’s additional signal is that the front-end soybean oil curve still refuses to break despite high crush margins, which means the market is still asking for nearby oil before it believes imports, crush, or substitution will solve the tightness.

Europe was active but uneven. The ARA paper market traded RME, FAME, UCOME, spreads, and HVO, with total reported volumes including 68 kt in RME, 24 kt in FAME, 13 kt in UCOME, 42 kt in UCOME/FAME, and 12 kt in HVO II. AOM deals showed HVO Class II at 1,300, UCOME at 530 to 545, FAME at 420 to 430, and RME at 475. FOB ARA indications put June RME around $1,581 to $1,601/mt, FAME 0 around $1,481 to $1,501/mt, UCOME around $1,641 to $1,661/mt, and HVO around $2,876 to $2,896/mt. On the soft oil side, Dutch origin soyoil was offered at €1,130/mt for June and July, down €5/mt, while Dutch origin rapeseed oil was offered at €1,300/mt for July, up €25/mt, and €1,165/mt for Aug-Oct, up €15/mt. The RME/FAME spread in June was still around $100/mt, while UCOME/FAME was $160/mt for June and $130/mt for July. Waste-based molecules remain well bid, but the whole European structure is still adjusting to the much stronger energy complex.

On palm, the point is not new, but today’s data reinforce the same message we have been making: palm is not confirming the panic embedded in U.S. soybean oil. SPOMA’s full May reading improved materially from the early-month collapse, with production down 10.07% for May 1-31 versus down 31.61% for May 1-5. The Reuters poll for May MPOB still points to stocks rising to 2.36 million mt from 2.31 million mt, up 2.2%, even with production down 4.5% and exports down 4.8%. This keeps the palm balance sheet loose enough to challenge the U.S. soybean oil premium. With CFR West India CPO around $1,257-1,267/mt for July and soybean oil around $1,265-1,275/mt, the global physical market is not paying the same scarcity premium as Chicago. The U.S. is still trading RINs and domestic policy pressure. The rest of the world is still trading physical vegetable oil replacement economics.

SAF is in the news today because the Wall Street Journal highlighted the gap between airline demand for lower-carbon fuel and the lack of available supply during the current oil shock. For biodiesel traders, this is the right discussion because the issue is no longer only decarbonization. It is now energy security. SAF represented only 0.6% of aviation fuel last year, with current production a little above 2 million mt against global jet fuel consumption close to 300 million mt. U.S. SAF production rose to about 240 million gallons in 2025 from 39 million gallons the prior year, but this is still 12.5 times below the old 3 billion gallon target. The policy point is important. U.S. producers receive support through RFS value and 45Z, but SAF production remains limited because the economic return on renewable diesel is still better than the return on SAF for many producers. Airlines, by contrast, do not receive the same direct production subsidy.

In non-mandated markets, airlines may partly offset the high SAF cost through scope 3 emission claims sold to corporate customers, but this market remains limited. In mandated markets, the accounting is different. Under ReFuelEU Aviation, jet fuel suppliers must meet a 2% SAF share in 2025, rising over time, and direct flights from the U.S. to Europe are exposed to those rules through the European airport uplift requirement. Scope 3 resale should therefore only apply to voluntary SAF purchased above the mandated share, not to the compliance portion. There is also a commercial carbon intensity constraint. When you speak to airlines, they generally do not want only mandate-eligible SAF. They want close to 90% GHG savings versus fossil jet fuel because this gives the strongest scope 3 value to corporate customers. In practice, this narrows the feedstock pool sharply. HEFA SAF from UCO is the main pathway that regularly meets this type of carbon saving expectation, while many crop-based or higher-CI feedstocks struggle to deliver the same claim value. This makes the SAF problem even tighter: producers already prefer RD economics, airlines are not directly subsidized, and the feedstock airlines most want is also the feedstock facing the strongest competition from RD, biodiesel, HVO, and European mandates.

Ukraine export data adds one more supply signal. May grain and oilseed exports slipped to 4.009 million mt from 4.303 million mt in April, with corn exports down to 2.384 million mt from 2.726 million mt and wheat down to 1.285 million mt from 1.332 million mt. Soybean exports rose to 198,000 mt from 162,000 mt, while rapeseed exports rose to 123,000 mt from only 20,000 mt in April. This is not the main biodiesel pricing driver today, but it matters for Black Sea vegoil and meal flows because any shift in Ukraine logistics affects European feedstock availability and crush economics.

The bottom line is that today’s market is pricing crisis optionality. Gasoil is up more than 5% on the day, D4 RINs are still near 2.415, July soybean oil is still near $1,743/mt, and U.S. biodiesel crush margins improved despite high feedstock costs. More importantly, soybean oil spreads have not broken, even with crush margins above $4/bu. That tells us the market still wants nearby oil. At the same time, India is already seeing fuel demand stress, palm stocks are expected to rise 2.2%, and global soyoil outside the U.S. is still competitive with palm. This leaves the market with a large contradiction: U.S. policy keeps pulling soybean oil higher, while global physical vegetable oil values suggest the arbitrage pressure will keep building. SAF adds one more layer to the same story. Policy has created demand, but inventories, molecules, economics, carbon intensity, and mandates still decide where the barrel goes.