Tight Gasoil, Tighter Biofuel Uncertainty

Europe’s biodiesel market remained subdued mid-week even as energy futures surged. The ICE gasoil Nov/Apr backwardation widened to +77.75 $/mt, its steepest in months and more than 20 percent higher than at the start of the week, underscoring acute prompt tightness ahead of the November delivery window. Physical ARAG barge trading stayed thin, with RME +$698/mt, FAME0 +$601.50/mt, and UCOME +$781/mt, while UCOME paper volume surpassed 200 kt early in the week—the heaviest turnover since September—as traders repositioned around policy expectations.

Feedstocks were slightly firmer: Dutch RSO €1,120/mt, soy oil €1,135/mt, sunflower $1,400/mt FOB N. Europe, and BOGO + $388. Yet the soy-oil Dec/May carry (–1.19 ¢/lb) remains wide, confirming structural oversupply despite the modest rebound in Chicago. Even so, gross margins for RME remain relatively healthy at about $153/mt, based on a flat price of $1,418/mt and rapeseed oil at €1,095/mt (× 1.1545 = $1,264/mt). That cushion is helping European producers absorb some of the higher utility and compliance costs as they wait for regulatory clarity.

All attention in Europe is now on Germany’s delayed RED III transposition vote, expected within days. Lawmakers are debating whether to remove double-counting for waste-based feedstocks, tighten traceability rules, and align national GHG-quota targets with EU-level mandates. A stricter outcome could lift credit values and push demand toward advanced fuels; a softer transition would prolong oversupply in conventional FAME streams. Until Berlin acts, forward contracting across Europe remains frozen and producers continue to hedge day-to-day.

Across the Atlantic, the U.S. biofuel sector faces its own version of uncertainty. ADM’s Q3 results revealed crush margins down 93 percent y/y, with management citing “the status of highly anticipated biofuel policy” as a major drag. Marathon Petroleum likewise reported its renewable-diesel unit running at 86 percent capacity yet posting a $56 million EBITDA loss and –$123 million gross margin as high feedstock costs met stagnant RIN values. Both companies warned that the absence of clear EPA guidance and inconsistent trade policy are undermining investment confidence just as U.S. renewable-diesel output reaches record levels.

Additionally, Washington’s trade diplomacy has descended into farce: China’s much-publicized suspension of some retaliatory tariffs leaves a 13% levy on U.S. soybeans, ensuring that Brazilian cargoes remain the cheapest and most competitive globally. The USDA’s own export ledger now lists Bangladesh among the top destinations for U.S. soybeans — a glaring indicator of how fragmented American export flows have become. For a country that dominated global soybean trade, this policy drift borders on the absurd — the ultimate proof of indecision and mismanagement undermining both farmers and biofuel refiners and will most likely result in more knee-jerk reactions and counter-reactions.

Meanwhile, Asia is quietly moving forward. South Korea’s JC Chemical announced plans for a UCO-to-SAF feedstock facility in Malaysia, supported by the National Energy Transition Roadmap, strengthening Malaysia’s role as a regional hub for sustainable aviation fuels. In the broader veg-oil complex, CPO futures on Bursa Malaysia rose 0.7 percent to 4,144 ringgit ($988)/t on firmer export indications, while palm olein in China eased on profit-taking.

The global picture is one of contrasts: Europe tight on energy but paralyzed on policy, the U.S. awash in production but strangled by uncertainty, and Asia quietly capitalizing on SAF. Until RED III and U.S. EPA clarity arrive, biodiesel producers will keep hedging through volatility while others seize the momentum.