The Oilseed Overhang Grows

The backdrop today is still the U.S. shutdown, which has turned more combative and acrimonious—raising the odds it runs longer than first expected. D4 RINs slipped to 1.022 while Dec26 held firm at 1.07. Gasoil weakness bled into bean oil, which lost nearly 1%. In Asia, Golden Week drew opportunistic buying, with Pertamina stepping up for additional October gasoil and jet cargoes, while Taiwan’s CPC issued a rare tender to import November barrels.

In the West, Russian diesel exports are falling faster than expected. September seaborne shipments were down roughly 20% month on month to about 2.4 million tonnes due to refinery outages and partial export curbs. Analysts still think Middle East and U.S. Gulf barrels can cover Europe in Q4, which helps explain why ICE gasoil backwardation keeps easing, with Oct/Dec now at +14.75 and Oct/Jul at +44.25.

ARAG trading into the last days of October remained focused on UCOME. The UCOME/RME spread widened to +46, with UCOME at $1,481/mt versus RME at $1,435/mt. That spread highlights relative firmness in UCOME, but margins in Europe remain under pressure as gasoil values soften. Additional weight is likely to come as Ukraine moves to lift its export tax on rapeseed, freeing its full 3.3 million-tonne crop for export. Combined with expected Canadian canola oil inflows in Q4, this creates a heavy overhang that could depress RSO values in NWE dramatically into year-end, dragging RME lower and forcing UCOME to defend its premium.

Across the Atlantic, the biodiesel screen crush margin in the U.S. saw a slight improvement today, moving to about –48 c/gal from –50 c/gal yesterday. The change was entirely driven by bean oil weakness against heating oil, but margins remain firmly negative, leaving little incentive for discretionary production or forward hedging. At the same time, the soybean crush margin itself has collapsed by about 25% over the last three months, sliding from summer highs above 200 (74/mt) to the mid-140s ($51/mt) today. This deterioration signals tighter processing economics, and while crushers may still run for protein demand, the oil side continues to weaken, compounding the challenges for biodiesel.

Palm oil is sending its own signals. December POGO has spiked back above $400, moving well beyond the level of the biodiesel export levy that subsidizes domestic blending. With Indian palm imports dropping to a four-month low in September—down nearly 16% month on month to 833,000 tonnes—as refiners switched to cheaper soyoil, exports from Indonesia and Malaysia are under pressure. The combination of softer exports and comfortable Indian stocks has added volatility to POGO, but palm still looks comparatively firm in absolute pricing terms. Bursa Malaysia CPO is near 4,450 MYR/mt (~$1,058), cash offers into India were heard at $1,155–1,160/mt CFR WCI against bids at $1,135–1,145, Indonesian FOB CPO at $1,125–1,135, and olein for the second half of October offered at $1,075–1,085 FOB. With POGO now spiking well above the levy threshold, palm’s blending economics versus gasoil are being stretched, risking a cap on subsidized demand even as fundamentals hold firm.

The market enters Q4 with three stress points: collapsing U.S. crush margins, a looming rapeseed and canola glut that threatens to depress RSO in Europe, and palm struggling to defend competitiveness as POGO spikes.