Tariff Tensions, Margin Pressures hits Chevron, and the Weight of a Weak Dollar

It was a notably quiet session in the ARAG barge market today, yet FAME 0 still managed to trade at $1287/mt and UCOME at $1401/mt. These levels, while stable, continue to reflect the persistent strain on biodiesel margins—especially in the U.S., where feedstock values remain detached from diesel economics. The calm in trading belies the deeper undercurrents of policy and structural uncertainty looming over the global biofuels trade.

In Europe, attention is shifting away from market fundamentals toward geopolitics, as the bloc prepares to respond to the U.S. Section 301 tariffs. Unlike the UK, which managed to secure a partial, interim agreement, the EU’s trade posture is complicated by its large surplus with the U.S.—second only to China. That reality may prompt this administration to adopt a firmer tone. With broader trade negotiations pending, biofuels are likely to remain front and center, just as they were in the UK deal.

Across the Atlantic, distress signals from the U.S. biodiesel sector continue to intensify. Chevron, one of the largest players, has initiated layoffs at several biodiesel plants, including assets acquired via its purchase of Renewable Energy Group (REG). The company cited unsustainable feedstock costs, persistently negative blending margins, and a lack of coherent federal policy as reasons for the restructuring. This mirrors developments in the UK, where Greenenergy recently shuttered one of its plants. These closures reflect not just weak margins but an industry facing structural oversupply relative to viable demand at current economics—signaling the start of a broader consolidation cycle.

Meanwhile, the bean oil-to-gasoil ratio has surged to 1.79x, pushing U.S. biodiesel screen margins deeper into the red—currently at -47 cents/gal, with forward curves indicating further deterioration to -52 cents/gal by December. D4 RINs edged up to 1.129, but this mild gain does little to ease the broader pressure. Without decisive legislative or regulatory support, many standalone producers could struggle to survive the year.

Adding to the bearish sentiment is the sustained weakness in Asian refined product markets, now further aggravated by a sharp rise in Russian seaborne fuel oil exports in April. The combination of tepid Asian demand and growing Russian supply is placing continuous downward pressure on the global gasoil complex. As long as this structural oversupply persists, it will continue to weigh on margins for renewable diesel and biodiesel producers alike—particularly in a market environment where the U.S. Dollar Index has weakened to 99.405, further complicating the trade flows of both feedstocks and finished products.