U.S. Oil Stocks Plunge, Australia Eyes China, Indonesia Tariffs Shift – Biodiesel Market Reshaped

May’s NOPA data revealed a deepening disconnect between soybean crush and oil inventories. U.S. processors crushed a record 192.829 million bushels in May, up 5% year-on-year, yet soybean oil stocks fell to just 1.373 billion pounds — the lowest May level in 21 years and 20% below 2022. The figure also came in under the average trade estimate of 1.451 billion pounds. This rare divergence confirms that downstream demand remains robust, likely driven by a combination of strong renewable diesel (RD) production and record U.S. soyoil exports.

US Soyoil stocks

That assessment is reinforced by EPA data showing 629 million D4 RINs were generated in June, up from 602 million in May. Despite policy headwinds and uncertainty over small refinery exemptions (SREs), production is still tracking ahead of expectations. Meanwhile, a FOIA (freedom of information act) release reported by Argus reveals that small refiners are pushing the EPA not just for SRE waivers but also for retroactive RIN credits — including for past years of full compliance. The EPA has responded by pledging to clear its backlog, but the news injects further volatility into RIN pricing and future compliance dynamics.

European barge markets remain defensive. UCOME continues to command a strong margin of $145/mt over FAME 0, trading at $1450/mt FOB ARAG. Meanwhile, RME and FAME 0 are last assessed at $1350/mt and $1304/mt respectively, with thin diesel cracks, weak East-West spreads, and poor Rhine logistics keeping overall sentiment cautious. Despite seasonal support for RME heading into Q4, the backwardated gasoil structure offers little incentive for storage or speculative length, keeping liquidity tight. RSO prices in Northwest Europe were slightly higher but exhibited a flat curve through winter. Nevertheless, the BOGO structure is in a strong contango of -$54/mt to Jan26, telling producers of biodiesel to produce now and sell later. It should be noted that the POGO structure is not dissimilar to BOGO but offers only -$30/mt to Jan26.

Global trade developments are increasingly shaping the biofuels landscape. The U.S. has formally accused Brazil of breaking a longstanding bilateral ethanol trade pact, with U.S. exports collapsing from $761 million in 2018 to just $53 million in 2024. In Asia, Australia is close to sealing a deal with China to ship 150,000–250,000 tons of canola in five trial cargoes, potentially reopening a key channel that’s been closed since 2020. This would reduce Canada’s dominance in Chinese rapeseed imports — especially relevant as China maintains 100% tariffs on Canadian canola meal and oil. The move may disrupt global seed oil flows heading into Q4.

Lastly, Indonesia and the U.S. have struck a new tariff deal, lowering the previously threatened 32% tariff on Indonesian goods — including palm oil — to 19% starting August 1. While this avoids the harshest outcome, palm-based biodiesel exports will not be affected as there are no pathways anyway to the U.S. much like Europe. As part of the agreement, Indonesia will drop tariffs on U.S. goods and has agreed to major purchases of American aircraft, energy, and agricultural products. While diplomatic tensions ease, the 19% tariff remains meaningful and will affect U.S. import competitiveness for palm-based products just as demand begins to recover.