The Screen Is Trading Peace, But the Ships Are Not Moving Yet

Energy gave back a large part of the war premium today as the market started to price a reopening of the Strait of Hormuz, but the screen is now moving faster than the ships. WTI July fell to $75.79, down $4.96, while Brent August fell to $78.98, down $4.19. ICE gasoil followed, with July last around $893.50/MT, down $40.25 on the day. The technical break is now clear. July gasoil has traded below both its 20-day WDMA at $1,125/MT and its 50-day WDMA at $944.96/MT. The next major moving-average support sits much lower, near the 100-day WDMA at $792.50/MT. That raises the risk of another liquidation leg if the market continues to trade the ceasefire headline.

ICE Gasoil

The problem is that the physical market has not confirmed the headline, while Russia clean product supply is also tightening. I do not think the Hormuz crisis is over. The issues are too complex to be resolved by a headline alone: vessel security, insurance, navigation fees, safe-passage guarantees, military deconfliction, and the willingness of shipowners to re-enter the Strait all need to be tested in real time. Hormuz traffic remains far below normal commercial levels, with only five confirmed crossings recorded on June 15 and no meaningful uptick in activity. At the same time, Russian seaborne oil product exports fell 15% month on month in the first half of June to about 3.3 million MT, while Primorsk ULSD loadings fell 18% to 520,000 MT. Tatneft is also limiting gasoline and diesel sales across its retail network, and drone strikes have disrupted processing at several refineries. The gasoil spread market is pricing normalization, with July/August near +15 and July/September down to +27.25, versus a May peak above +120. These are no longer crisis levels. The market is now assuming that Hormuz flows resume quickly and that Russia product losses do not worsen. That may prove correct, but it is a large assumption when physical flow, security, and Russian clean product exports are all still unresolved. Paper has normalized before physical flows have normalized.

Gasoil Jul/Sep

The market seems to believe that if the agreement is signed on Friday, we simply go back to Feb 27. I do not think that is realistic. Even in the optimistic case, a signed agreement only starts the normalization process. The legal reopening of Hormuz is not the same as an operational reopening. Shipowners, insurers, charterers, banks, port agents, and navies still need to test the route in real time. War-risk premiums, freight, demurrage exposure, safe-passage guarantees, and vessel positioning will not reset overnight. Pre-war traffic was around 130 crossings per day. June 15 showed only five confirmed crossings. Until we see several days of sustained commercial traffic, the market is pricing a return to normal before the physical system has proven it. Even if Hormuz improves, Russia remains a separate clean-product problem, with seaborne oil product exports down 15% month on month in the first half of June and Primorsk ULSD loadings down 18% to 520,000 MT. The global diesel balance does not return to Feb 27 simply because a document is signed.

This matters for biodiesel and renewable diesel because the energy leg is now weaker, while the policy leg remains strong. D4 RINs barely moved, with December 2026 at 2.418, down only 0.98%. The US biodiesel screen crush improved despite lower energy. The RD screen moved to 25.69 c/gal for July, up 2.98 c/gal, while September improved to 44.83 c/gal and December to 49.23 c/gal. Conventional biodiesel remains stronger, with July at 74.41 c/gal, September at 90.47 c/gal, and December at 93.09 c/gal. The message is clear: gasoil is breaking technically, but RINs are still doing the margin work. The RFS island remains intact.

The policy backdrop explains why RINs are not trading like crude oil. The 2026-2027 RFS rule became effective on June 15, and the numbers behind the rule are already visible in feedstock demand. The soybean industry expects to crush 57% of the domestic crop this year and next, up from 52% in 2024. US biodiesel and RD capacity utilization was back above 70% in April after averaging only 56% in 2025. EIA projects RD production up 24% and biodiesel production up 41% in 2026 versus 2025. March biomass-based diesel production used a record 1.28 billion lbs of domestic soybean oil and 432 million lbs of distillers corn oil. These numbers explain why D4 RINs stayed above $2.40 even with crude down more than $4 and gasoil down more than $40/MT.

The 45Z update also supports domestic feedstock demand, but it reinforces the split between RD and SAF. The June 2026 45ZCF-GREET update removes ILUC from the calculation for fuels produced after 2025 and restricts eligible feedstocks to North America. That improves the political case for US crop-based biofuels. It also keeps the near-term economics tilted toward RD because SAF loses the separate premium under 45Z after 2025, while RD has stronger obligated demand under road-fuel policy. Global SAF demand is expected to rise from about 3.0 million MT in 2026 to 12.8 million MT by 2030, but around 85% of expected 2030 capacity is still HEFA. That means SAF, RD, and biodiesel are still fighting for the same eligible oils and fats.

Soybean oil sold off, but it did not break. July soybean oil traded down to 72.37 c/lb intraday and last printed near 72.92 c/lb, down roughly 1.8% to 2.0% on the day. It remains above its 20-day WDMA at 71.88 c/lb. That is the key contrast with gasoil. Gasoil has broken below both the 20-day and 50-day WDMA, while soybean oil has held short-term trend support. The move in soybean oil is extended, with the 50-day WDMA down at 62.68 c/lb and the 100-day WDMA at 52.92 c/lb, but the first technical failure has not happened yet. Until soybean oil closes below the 20-day WDMA, this still looks like consolidation inside an uptrend rather than a confirmed reversal.

The relative value confirms the same point. July soybean oil is near $1,606.93/MT, while July gasoil is near $893.50/MT. That puts soybean oil near 1.80 times gasoil, up on the day because diesel fell faster than bean oil. July/December soybean oil remains backwardated by 4.84 c/lb. BOPO is lower, with July BOPO down $31.53 to $497.29/MT and September at $413.10/MT, but those are still large absolute premiums. BOGO moved higher, with July near $718/MT and December near $682/MT. This is the first clear sign of CBOT soybean oil starting to decouple from the global vegetable oil complex. Palm and global oils are reacting to energy deflation and better supply. US soybean oil is still anchored by RFS demand, RIN values, and domestic crush economics.

The US crop picture is not bearish enough to break that structure. Soybeans emerged reached 88%, above last year’s 83% and the 5-year average of 82%. Soybean conditions were 66% good/excellent, in line with last year and above the 5-year average of 64%. NOPA crush for May came in at 208.79 million bushels, down 1.4% from April and below trade expectations near 214 to 216 million bushels, but still up 7.6% versus last year. Soybean oil stocks fell more than 5% month on month to 1.85 billion lbs from 1.95 billion lbs. Lower crush with falling oil stocks is not bearish soybean oil when RINs remain above $2.40 and domestic biofuel demand is still pulling oil.

Asia is softer than the US because the palm balance has more nearby supply. SPPOMA Malaysian palm production for June 1-15 was up 13.79%, with yields up 12.90% and OER up 0.17%. The growth rate is slowing from +21.71% for June 1-5 and +17.42% for June 1-10, but production is still positive. Export surveys also improved, with June 1-15 exports up 9.56% on ITS and 23.8% on Amspec. That leaves palm with two-way fundamentals: better exports, better production, and El Niño talk that supports deferred risk more than nearby tightness. CPO values around $1,110 to $1,140/MT across the second half of 2026 remain high, but palm is no longer trading with the same urgency as US soybean oil.

India is also helping explain why global soybean oil does not collapse. CFR West Coast India soybean oil was discussed around $1,245 to $1,255/MT for July and August, while CPO was around $1,220 to $1,225/MT for June and July. That leaves the soybean oil premium to palm narrow enough to support Indian buying interest, especially after the recent shift from palm to bean oil. This supports global soybean oil demand, but it does not yet open relief into the US. The US market remains too expensive on a landed and adjusted basis, so the RFS island still needs to pay for domestic soybean oil rather than relying on imported replacement.

Europe was more active than the weekly paper volume suggests. Week 24 paper volume still looks light versus the previous four weeks, but today’s AOM barge window showed a clear uptick in physical activity across products. RME traded from +600 to +620, FAME traded mostly from +575 to +585, UCOME printed repeatedly around +695 to +700, and HVO Class II traded from +1425 to +1435. SAF also traded at +1170. That is important because the paper chart alone suggests fading interest, while the window shows buyers and sellers re-engaging after the gasoil correction. Lower gasoil has not killed bio demand in Europe. It has shifted the discussion back toward replacement values, mandate coverage, and documentation quality.

The June European averages still show strong mandate premiums. Month-to-date RME averages $1,546.64/MT, FAME 0 averages $1,461.73/MT, UCOME averages $1,616.39/MT, and HVO Class II averages $2,847.10/MT. Month-to-date gasoil settle averages $1,045.75/MT, leaving average premiums of $500.89/MT for RME versus gasoil settle, $415.98/MT for FAME, $570.64/MT for UCOME, and $1,345/MT for HVO Class II. Feedstock spreads also remain wide. Month-to-date FAME/SBO averages $209.04/MT, RME/RSO averages $152.90/MT, and UCOME/FAME averages $154.66/MT. These are not distressed levels. They are mandate values adjusting to a lower energy screen.

The soft oil board in Europe was less dramatic than the bio window. Dutch soybean oil was offered at €1,110/MT FOB for June and July, German soybean oil at €1,140/MT for June, Dutch rapeseed oil at €1,400/MT for June and €1,260/MT for July, and sunflower oil at $1,495/MT for July-September. The bio window, not the soft oil board, carried the stronger signal today. Europe is not short of nominal offers, but the mandate barrel still trades at a premium because documentation, CI value, and feedstock eligibility remain more important than flat feedstock price alone.

The UK added another SAF demand signal with a £219 million low-carbon fuels fund, including £93 million over the next two years for projects closest to production. The UK mandate starts at 2% in 2025, rises to 10% by 2030, and reaches 22% by 2040. This does not create an immediate feedstock shock, but it confirms where policy capital is going. Europe and the UK are building demand certainty. Asia is building capacity. The US is building an RD-first feedstock pull through RFS and 45Z. That mismatch keeps SAF and RD competing for the same eligible oils and fats.

Canada also moved from theory to physical RD demand. Braya completed its first Canadian sale of renewable diesel from Come By Chance, with 100,000 barrels, or 4.2 million gallons, sold into the Canadian market. The volume is modest, but the signal matters. Canadian programs are starting to pull domestic RD barrels into local demand rather than leaving all renewable diesel flows exposed to US or export economics. In a market where every low-CI gallon has optionality, that matters.

The conclusion today is that energy relief is not the same as biofuel relief. Crude and gasoil sold off hard on a potential Hormuz reopening, and gasoil has now broken below key moving averages. But Hormuz traffic still shows no real normalization, Russian clean product exports are already down 15% month on month in the first half of June, Primorsk ULSD loadings are down 18%, D4 RINs remain above $2.40, soybean oil remains above its 20-day WDMA, and the European AOM window showed stronger physical participation than paper volume suggested. For biodiesel and renewable diesel traders, the key spread is no longer crude versus vegoil. It is the policy bid in the US versus the deflationary pull from global energy and Asian palm. Today, the screen traded peace. The physical market has not shown peace yet.