Soybean Oil Breaks Higher, Paranaguá FOB Must Break Lower

Crude moved higher into the weekend with prices and speculative positioning aligned. Brent reached $87.65/bbl, WTI traded near $82.15/bbl, and Brent Aug/Dec widened to $4.86/bbl. Money managers raised Brent net length by 114,752 contracts to 169,839, driven by 75,996 new longs and 38,756 shorts covered. Gold followed crude higher, confirming broader geopolitical protection ahead of the weekend. Hormuz remains severely impaired, with no VLCC or LNG tanker crossing for a second day, although two VLCCs carrying four million barrels reappeared outside the Strait after earlier transits. Bab al-Mandeb remained open with no reported disruption.

Gasoil showed less conviction than crude. August ICE gasoil rose around 1% to $1,174.50/mt, while Aug/Dec backwardation slipped toward +$204.75/mt. The relative move suggests crude is catching up with the earlier distillate shock rather than gasoil pricing another immediate shortage. Refinery margins remain exceptional with Heat Crack still at $88/brl, yet product cracks failed to match Friday’s crude rally. Front BOGO widened sharply as soybean oil outperformed gasoil, reversing part of the energy-led compression seen earlier in the week. Traders now enter the weekend with crude carrying the geopolitical premium while gasoil waits for fresh evidence of lower refinery output, weaker Gulf loadings, or a new shipping disruption. Depending on weekend development, my feeling is that Gasoil will take another run higher.

August soybean oil jumped 3.3% to 74.81 cents/lb and the Aug/Dec inverse widened to 2.38 cents, while Malaysian palm oil remained broadly stable. The next adjustment should occur through Brazilian basis. August soybean oil at Paranaguá was already indicated around 1,750 to 1,800 points under CBOT. A sustained futures rally without matching export demand will force basis deeper into discount to preserve Brazilian competitiveness. CFR West Coast India soybean oil stood near $1,254 to $1,264/mt against CPO near $1,226 to $1,236/mt, leaving soybean oil only about $28/mt above palm. If Paranaguá basis fails to absorb the CBOT rally, Indian buyers will favor palm. If basis weakens enough, lower Brazilian soybean oil flat prices will force palm to remain discounted. Either route places pressure on palm. Record global sunflower seed production of 62.7 million tonnes, up more than 13%, adds another source of competing oil supply. It is remarkable that NWE prices for sunflower oil are still this high considering global production of seeds.

NWE biodiesel activity reflected a divided market. RME traded at a $495/mt premium to gasoil, close to $1,665/mt flat, while four FAME 0 deals averaged a $377.50 premium and about $1,548/mt flat. The RME premium over FAME reached $117.50/mt, driven by the sharp rise in prompt rapeseed oil rather than broad biodiesel scarcity. UCOME recorded no window trade and remained indicated near $1,664/mt, while HVO class II traded at a $1,280 premium, close to $2,909/mt flat. Paper liquidity centered on relative value, with 42,000 tonnes traded in RME/FAME and 49,000 tonnes in HVO class II. With the European rapeseed harvest approaching and sunflower supply expanding, buyers should cover prompt RME obligations without chasing the spike into deferred positions.

As expected, yesterday’s EPA data supplied the trigger for the US soybean oil rally. June D4 generation reached 839.14 million RINs, including 555.9 million from domestic renewable diesel, 210.27 million from domestic biodiesel, and 42.97 million from domestic renewable jet fuel. This equated to about 513 million gallons of biomass-based diesel, a monthly record. First-half D4 generation reached 3.86 billion, up 16% year on year, while imported biodiesel and renewable diesel produced only about 30 million June D4 RINs. Soybean oil rallied because the release confirmed stronger domestic feedstock consumption. D4 futures eased toward $2.435 because record production also increased compliance-credit supply. August screen margins fell to roughly $0.96/gal for renewable diesel and $1.46/gal for conventional biodiesel before 45Z and LCFS. The market now needs weaker Paranaguá basis, softer palm, or renewed RIN strength to absorb current soybean oil values without forcing further margin compression. We still need imports to generate 2026 RVOs.