China UCO Jan-May Exports Spike +37%

MOU countdown: 52 days to August 16. Using the June 17 electronic signing as the start date, the 60-day negotiation clock allows a final agreement within a maximum of 60 days and an extension only by mutual consent. This clock now matters for markets. Washington appears to be treating the MOU as a framework for better terms rather than an agreement ready for execution, especially after trying to link unfrozen Iranian funds to purchases of US agricultural products. Iran is rejecting this framing. Ghalibaf’s tweet, from Iran’s parliament speaker, makes clear the agriculture-for-assets language is not accepted by Tehran. This removes one possible headline support for US ag exports and keeps the political base under the Hormuz reopening weak.

Iran also has little incentive to give away leverage early if it is trying to move as much crude as possible while the 60-day window is open. Last Friday, 10 laden Iranian-flagged supertankers carrying close to 20 million barrels of oil were reported sailing from Chabahar in the Gulf of Oman toward Asia, likely for Chinese teapot refineries. That is separate from the broader Hormuz flow, where US Energy Secretary Wright said about 20 million barrels of crude exited the strait in one 24-hour period this week. The market is treating the reopening as supply relief, but the same data also shows why Iran might prefer speed over extension. At the same time, there is no visible strategic de-escalation signal from the US posture in the Gulf or around Ben-Gurion.

Iran VLCC lighting up like Xmas Tree

The market is trading the recovery in Hormuz traffic rather than the risk behind it. Bloomberg’s commercial crossing index showed 44 commercial vessel crossings on 6/24, split 12 eastbound and 32 westbound, with Brent marked at $72.41/bbl. Kpler put confirmed Strait of Hormuz crossings at 70 on 6/24, up 105% day on day, with 53 commercial transits. Both datasets show recovery from the traffic collapse after February, but neither shows a full return to normal. Bloomberg’s chart still compares the latest 44 commercial crossings with a pre-collapse range closer to 90 to 110. A recovery from near-zero crossings is not the same as a safe corridor.

SoH crossings

The shipping behavior confirms the risk. Windward reported four tankers turned around in the Strait of Hormuz while transiting the southern shipping corridor in Omani waters after an IRGC VHF Channel 16 broadcast warning vessels to transit only with IRGC permission on designated routes. Other reports also refer to IRGC warnings requiring Iranian permission for passage. Kpler noted increased use of the Omani route, but also highlighted dark routing, incomplete demining, unresolved inspections, sanctions and future Strait governance. The issue is no longer only whether ships are moving today. The issue is who controls the lanes, who grants permission, and whether insurers, charterers and cargo owners trust the corridor into the weekend.

The distillate screen agrees with caution. July ICE gasoil was $921.75/mt, up $40.75/mt, while December was $803.50/mt, up $18.00/mt. Jul/Dec gasoil strengthened to $118.25/mt, up $23.75/mt on the day, after briefly trading in the $70s earlier in June. The heat crack was near $67.16/bbl. Crude is calmer than gasoil, but biodiesel and RD do not trade crude replacement value. They trade distillate replacement value, and the distillate curve is still paying for prompt barrels.

Jul/Dec Gasoil

The physical risk stack is getting thicker. ExxonMobil Antwerp, a 320,000 bpd refinery with diesel and gas oil in its slate, is reported to stop output from June 29 to July 3 because of strike action. Russia is dealing with fuel shortages after repeated Ukrainian drone strikes on refineries, with seaborne oil product exports reported down about 15% in the first half of June versus the first half of May, and Moscow has discussed a diesel export ban. Petrobras also said it will import diesel in July after three months without diesel imports, even as Brazilian production approaches 3 million bpd. Europe has refinery outage risk, Russia has less product export flexibility, Brazil is returning to the import market, and Hormuz remains unstable. This combination supports the gasoil curve even if crude keeps fading geopolitical risk.

Soybean oil rallied on the day, but the broader vegoil market still lacked a clean bullish confirmation. July CBOT soybean oil was 70.45 c/lb, up 0.99 c/lb, equal to about $1,552/mt. December soybean oil was 67.06 c/lb, equal to about $1,478/mt, leaving Jul/Dec at 3.39 c/lb after losing 0.33 c/lb on the day. July BOPO rose to $429.64/mt, up $21.83/mt, while July BOGO eased to about $631/mt because gasoil rose faster than bean oil. July soybean oil was 168.5% of July gasoil, down 3.1% on the day. In Asia, September BMD CPO had fallen 0.56% on Wednesday to 4,632 ringgit, while Malaysia June 1-20 palm production was estimated up 3-7% month on month. India CPO was offered around $1,230-1,232.50/mt CFR WCI for July, while India soybean oil was offered around $1,277-1,282/mt CFR WCI for July. Indonesia’s B50 starts July 1, but the three-month transition period and the missing additional 2026 biodiesel allocation mean the palm demand increase is not yet cleanly priced. This is still a US RFS island story in feedstocks, not a global vegetable oil shortage story.

The UCO picture is the bearish feedstock signal for virgin vegetable oil. China exported 1.3675 mmt of UCO in January-May, up 36.8% from 999,500 mt in the same period last year. That annualizes to about 3.28 mmt, a huge supply pace for low-CI waste feedstock. The May destination data shown in the pie chart is not the full Jan-May distribution, but it still matters because the May buckets add to roughly 308 kt and explain almost the whole May export flow. The US took about 75 kt, Canada 33 kt, the Netherlands 51 kt, Italy 33 kt, Singapore 31 kt, Malaysia 31 kt, South Korea 28 kt and Thailand 15 kt, with Romania, Bulgaria, India and smaller destinations making up the balance. Europe was therefore not only the Netherlands at 51 kt. Listed European destinations were at least 90 kt in May, while North America was about 108 kt and Asia was also above 100 kt. This is a serious bearish signal for vegetable oils.

For vegetable oil, this is bearish because every qualified UCO barrel displaces some demand for soybean oil, rapeseed oil or palm oil in RD, HVO, SAF and UCOME. More Chinese UCO helps physical availability of low-CI feedstock and reduces the need to bid up virgin oils for renewable fuel demand. For UCO itself, the signal is mixed rather than bearish, because traceability, quality and certification still matter. But for flat vegoil, China exporting UCO at a 3.28 mmt annualized pace is a major reason why global vegoil is not confirming the US soybean oil rally. The May UCO pie chart makes this simple: the low-CI feedstock market is global, but the substitute supply shock is bearish virgin oil.

The US biodiesel screen improved because distillate and D4 support both held. The July renewable diesel screen crush moved to 64.25 c/gal, up 5.64 c/gal, while the July conventional biodiesel screen crush moved to $1.1027/gal, up 6.60 c/gal. August showed 64.44 c/gal for RD and $1.0840/gal for conventional biodiesel. December was weaker at 55.91 c/gal for RD and 98.57 c/gal for conventional biodiesel. Dec26 D4 RINs were 2.445 with 22 lots traded. Growth Energy also moved to intervene in support of EPA in the 2026 and 2027 RFS litigation, while OMB language on E15 points to a permanent year-round fix. Ethanol still matters through nested RIN behavior, with July RBOB at $3.0029/gal and July ethanol at $1.83/gal, leaving ethanol at a $1.1757/gal discount to RBOB.

Europe did not look soft in the renewable diesel and biodiesel window either. Dutch soybean oil offers were €1,150/mt for June and July, up €5/mt, while German soybean oil was €1,165/mt, up €5/mt. Dutch rapeseed oil for July was €1,285/mt, up €5/mt, while Aug-Oct rapeseed oil was €1,160/mt, down €2/mt. Sunflower oil for Aug-Sep was quoted at $1,505/mt, up $10/mt. In the ARAG window, RME printed around $1,482.94/mt, FAME 0 around $1,461.44/mt, UCOME around $1,604.74/mt, HVO class II around $2,660.59/mt, and SAF around $2,662.85/mt. Week 25 paper volume across RME, FAME 0, UCOME and HVO2 was about 458 kt, above week 24 at 349 kt, but below week 23 at 674 kt.

The trading takeaway is sharper after today’s Hormuz headlines and vegoil data. Crude is trading the recovery in crossings, while gasoil is trading the remaining risk to prompt distillate supply. The MOU has 52 days left on the clock, Iran is contesting the Omani route, Washington is trying to improve terms, Iranian crude is moving quickly through the window, and the agricultural purchase language appears rejected by Tehran. Vegoils are not confirming a global feedstock squeeze. China’s 3.28 mmt annualized UCO export pace says the opposite for virgin vegetable oil: low-CI substitute feedstock is moving at scale. For biodiesel and RD traders, the next move still depends more on distillate replacement value and low-CI feedstock competition than on global vegoil scarcity. Into the weekend, the key inputs are vessel traffic and IRGC warnings around Hormuz, Russian diesel export language, Exxon Antwerp strike timing, Petrobras diesel buying, China UCO flows, Indonesia B50 allocations, and whether Jul/Dec gasoil holds above $100/mt while D4 RINs hold near 2.45. My take is that BOGO drops dramatically shortly.

BOGO