Singapore Diesel Nears $300 per Barrel Breaking point as BOGO Collapses

The distillate market is now in full repricing mode, and Asia is clearly leading. Singapore 10ppm gasoil is approaching $300 per barrel, with latest indications near $288.68/bbl. On the paper side, ICE gasoil is trading at $1,516/mt front month, with May at $1,344/mt, June $1,170/mt and July $1,035/mt. The Apr/Jul spread is now around $481/mt and Apr/Dec close to $690/mt. This level of backwardation is extreme and reflects immediate scarcity of middle distillates rather than forward expectations.

Apr/Dec ICE Gasoil

The physical signals confirm it. Singapore fuel oil inventories fell to 23.47 million barrels, down 4.3% week on week, while imports dropped 21.8% week on week and Middle East volumes are nearly absent as Hormuz disruption continues. At the same time, crude has repriced sharply higher with Brent above $110/bbl after a roughly 7% move. Asia is short prompt barrels and is setting the global price.

Europe is now flashing the same early warning signs. In France, about 16% of service stations, roughly 1,600 out of 9,800, are already affected by fuel shortages, with diesel the most impacted as the country heads into the Easter travel period. This is not yet a crude shortage. It is a logistical squeeze under extreme backwardation, the same pattern already visible in Asia where prompt diesel is being rationed through price.

Against this backdrop, vegoils are losing relative value despite strong outright prices. CBOT bean oil traded up to 68.92 c/lb, or about $1,519/mt, but that is now essentially flat to ICE gasoil at $1,516/mt. The consequence was a sharp collapse in BOGO. May BOGO fell to about $175/mt from $265/mt, a drop of $90/mt or 34% on the day. This is a structural move. Energy is leading and feedstocks are no longer setting the pace.

BOGO

The physical vegoil market confirms this imbalance. Brazilian FOB Paranagua soybean oil premiums remain deeply negative, with indications ranging from about -950 to as low as -1500 points depending on shipment timing. This highlights that global soy oil is still looking for demand at the margin even as futures remain supported.

Palm oil adds further tension but also highlights the divergence. Malaysian inventories are estimated down 19% month on month to 2.19 million tons, with exports up 37% to 1.55 million tons as buyers shift away from disrupted soy and sunflower flows. Palm has rallied about 19% year to date, but it still cannot keep up with the speed of the distillate squeeze.

In Europe, the ARA barge market reflected this clearly. RME traded between -35 and -5, FAME between -78 and -25, while UCOME held at +70 to +75. With front gasoil at $1,516/mt, that implies flat prices around $1,480 to $1,510/mt for RME, $1,440 to $1,490/mt for FAME and $1,585 to $1,590/mt for UCOME. HVO Class II traded at a $1,270 premium, keeping flat price near $2,786/mt. The premium structure remains intact for high-GHG-saving molecules, while crop-based biodiesel continues to lag on a relative basis.

Margins are starting to reflect this divergence. Screen biodiesel crush shows May around 0.71 c/gal (213/mt) but June already slipping to 0.48. The forward curve is eroding profitability even as flat prices rise. US values confirm the lack of uniform strength. B100 East Coast is around $6.72/gal, down 9.10 cents on the day, while California renewable diesel is around $3.84/gal, down 10.66 cents or 2.7%.

The US market is not leading this move and is reacting with a lag under tighter credit constraints.

US economics also reinforce that policy support is uneven. Renewable diesel margins for December are already sufficient, but biodiesel remains only marginally economic on prompt barrels. Roughly $0.50/gal of biodiesel margin sits in 45Z and is not immediately cash, requiring tax equity structures and often a discount to monetize. By contrast, D4 RINs at around 1.80 remain liquid and fully priced into the system. This explains why RINs are still the dominant driver and why there is potential for further upside as biodiesel run rates need to increase to meet RVO obligations. It also implies continued reliance on imports, with European margins acting as the clearing mechanism.

Policy remains important but is not the dominant driver today. The decision to reallocate 70% of exempted RVOs supports RIN values but does not offset the scale of the distillate-driven move. At the same time, EPA assumes that up to 20% of soybean oil currently used in food and industrial demand could shift into biofuels in 2026 and 2027, which supports bean oil structurally but does not prevent its underperformance versus diesel.

The system is now clearly unbalanced. Distillates are trading immediate scarcity across Asia and increasingly in Europe, while vegoils are tightening due to logistics and policy expectations but are not leading the market. As long as Singapore diesel remains near $300 per barrel and gasoil backwardation stays at these levels, biodiesel and renewable diesel flat prices will remain supported.

What matters now is timing. The next two weeks covering Easter and immediately after look decisive for the trajectory of this conflict. The market is not pricing a quick resolution. My base case is now a 75% probability of further escalation versus 25% for a diplomatic outcome. I hope that proves wrong, but positioning across diesel, freight flows, and the extreme backwardation suggests the system is preparing for a break rather than a normalization.