The Quiet Before the Q1 Storm?

BOPO fell another 7% today as bean oil extended its November slide, with funds unwinding length ahead of tomorrow’s CME bean oil options expiry, where a large sheet of out-of-the-money positions will evaporate. January atm volatility remains quiet in the low 30s, while March 2025 otm call options continue flashing stress with implied vols near 118% on the wings — the mid-curve remains the fragile part of the structure.

Palm oil softened further as Malaysia’s 1–20 November exports posted another sharp contraction (–20.46% / –14.13%), adding pressure just as Indonesia faces rising political tension. Protests in Riau against plantation seizures for Agrinas illustrate how sensitive domestic supply has become. Any push toward B50 risks lifting domestic prices and tightening availability, limiting Indonesia’s capacity to export into early 2026. The market is not pricing this risk.

Corporate conditions are also fragile. IFFCO Group, a major Middle East–China palm conduit, is undergoing a large-scale restructuring with roughly $2 billion in debt under renegotiation and a newly installed board. Counterparty caution is climbing inside a supply chain already stressed by weak Malaysian flows and Indonesian unrest.

European biodiesel markets were steady but uninspired, with RME ~ $1,493/mt, UCOME ~ $1,531/mt, and FAME ~ $1,300/mt. A notable development is the near-parity between RME and UCOME. Despite a UCOME GHG/double-counting advantage of roughly +230/mt, winter-grade RME has been pulled higher because it remains the only methyl ester capable of operating down to –15°C. UCOME, as FAME 0, is limited to around 0°C and cannot substitute in winter diesel pools, explaining why buyers continue covering RME deliveries well into mid-December.

HVO pricing remains elevated for different reasons. Although UCOME cannot be blended directly into diesel in winter, it is fully usable as hydrotreatment feedstock. However, the European refining system under-used cheap UCOME as feedstock during the summer — precisely when waste-feeds were abundant, margins were better, and cold-flow limits were irrelevant. This under-buying is now forcing refiners to run expensive high-GHG-saving HVO pathways in winter, when UCOME is more costly and winter-spec obligations peak. This is why the HVO–UCOME spread, though now easing, remains elevated at roughly $930–$980/mt after correcting from a peak of $1,050–$1,150/mt only a few weeks ago. The premium was never natural; it was a compliance-timing outcome driven by European summer caution.

The U.S. added a major bearish signal. EIA reported that August 2025 feedstock consumption was 28.8% lower than August 2024, confirming structurally weaker renewable diesel and biodiesel run rates versus last year. Usage of soybean oil, distillers corn oil, yellow grease, and UCO all declined, removing a major demand sink from the global waste-oil balance. Even with D4 RINs ticking modestly firmer around 1.025, the market still trades with lighter replacement expectations. The collapse in U.S. feedstock burn remains one of the year’s most bearish datapoints and has contributed directly to ongoing vegoil softness.

Distillates remain tight. Gasoil eased slightly today, but backwardation stays entrenched, reinforcing elevated HVO and SAF values even as vegoils weaken and keeping the general pace of biodiesel trade subdued.

First Resources’ 3Q results showed solid operations but a thin capital base as they prepare to commission their Huelva HVO/SAF project. With Indonesia’s internal climate deteriorating and European capacity expanding, the company looks increasingly exposed and potentially positioned for consolidation. Their margins remain closely tied to the B50 trajectory in Indonesia — a policy now under political strain.

Forward curves diverged: BOGO firm, POGO steady, BOPO heavy. The bean-oil collapse is being interpreted as biodiesel demand destruction, but palm’s political fragility suggests that view is incomplete. If Indonesia tightens discretionary exports while Malaysia’s flows remain weak, palm could become the bullish hinge for vegoils. None of this is reflected in current pricing.

Screens look soft, but the underlying structure is anything but: collapsing Malaysian exports, Indonesian unrest, IFFCO restructuring, a 28.8% YoY collapse in U.S. feedstock demand, winter-spec constraints, and mid-curve volatility all argue for far more two-way risk heading into December than flat prices imply.