UCOME Tightens, HVO Should Collapse, SAF Tempts Asia: Diesel Determines Everything

European markets opened today under the heavy shadow of the November gasoil expiration, and the numbers tell the story clearly. Physical cash gasoil settled at $784.75/mt, while the December futures contract closed at $715/mt, leaving an extraordinary $69.75/mt backwardation between the expiring and prompt month. The Dec/Apr spread narrowed nearly 6% today to +$54.75/mt, but this did little to offset the fact that physical gasoil has surged nearly 24% since the U.S. sanctions package against Russia was introduced in mid-October. Today marked the first meaningful profit-taking after a three-week vertical rally.

The ARAG barge window echoed the same tension. FAME 0 traded at $1,313/mt, while RME held near $1,449/mt FP equivalent. Week 46 delivered one of the heaviest paper flows of the year, with combined RME and F0 derivatives activity approaching 1 million metric tons of notional, roughly three to four times normal weekly volume. Trading centered on RME/F0 and RME/UCOME spreads as participants aggressively recalibrated winter exposure following the gasoil expiry shock. RME/F0 settled at $135/mt, while UCOME remained firm at $1,502/mt, placing it $53/mt above RME and reinforcing the structural tightness in advanced waste-based grades heading into winter.

Feedstocks in Europe remained steady. Dutch soybean oil indications for Q1 hovered near €1,100/mt, rapeseed oil held around €1,115/mt, and Rotterdam rapeseed oil for December saw offers in the €1,083–1,085/mt range. Sunflower oil offers for December across six EU ports were steady near $1,365/mt, though liquidity remained thin. The vegoil complex continues to lack clear direction, pressured by rising palm availability yet supported by intermittent energy-linked volatility.

Regulatory developments in Europe added another layer of uncertainty. The EUDR has already been postponed once—from December 2024 to December 2025—and the European Commission has now proposed an additional postponement to December 2026 for small and micro enterprises, with simplified due-diligence requirements. Medium and large firms still face the 30 December 2025 compliance deadline, but political momentum is building to “stop the clock” as more than 15 member states warn that national authorities, IT systems, and geolocation verification tools are unprepared. Ports such as Rotterdam, Antwerp, and Hamburg caution that they cannot deliver uniform enforcement, raising the risk of fragmented application and potential forum-shopping. For biodiesel markets, any delay keeps multi-origin soybean supply chains flowing into Europe longer than expected, indirectly supporting FAME margins in 2026.

Indonesia reinforced the global supply story. GAPKI reported January–September palm oil output above 43 million tons, up 11% year-on-year, with exports rising 13.4% to 25 million tons. In parallel, the government is evaluating an expansion of 600,000 hectares of new palm plantations beginning in 2026—400,000 ha for smallholders and 200,000 ha for PalmCo—on top of the existing 16.38 million ha already in production. This expansion would cement Indonesia’s role as the anchor supplier of the global palm complex, pressuring medium-term vegoil values and shaping future biodiesel feedstock availability.

Elsewhere across vegoils, Malaysian CPO futures closed slightly lower at 4,125 MYR/mt ($998/mt) amid a stronger ringgit and slower November exports. Indonesian FOB CPO remained around $1,075/mt, with olein near $1,015/mt. In China, Dalian palm olein slipped 0.09%, soybean oil rose 0.44%, and rapeseed oil futures gained 1.41% on supply concerns. CME soyoil eased to 50.56 c/lb, pressured by crude weakness after OPEC shifted from forecasting a deficit in 2026 to anticipating a more balanced outlook. South American soyoil bases firmed slightly, though Argentine premiums remain unstable amid domestic disruptions.

Argentina added a critical development as the government reduced the biodiesel blending mandate from 7.5% to 7.0% to temper diesel inflation after domestic soy oil prices surged above export parity. Actual blending is already below 6%, as elevated feedstock costs forced many producers to curtail operations. Domestic soy oil now trades roughly 14% above export parity, distorting economics and reducing internal demand. Even with soy oil trading at steep discounts (about –390 points), logistical disadvantages keep Argentina uncompetitive versus Brazil’s Paranaguá for export programs.

In the United States, the reopening of the federal government through late January removed some regulatory uncertainty, but D4 RINs traded softer. The Dec25 ICE D4 contract settled at 1.018, down 0.25 cents on thin volume. With CME bean oil up 30 points and crush margins widening, the weakness in RINs appears to reflect a temporary lack of bids rather than weakening compliance demand. Mississippi River logistics remain the dominant domestic factor: St. Louis near +1.0 ft, Memphis still negative, and draft restrictions continue to distort north–south flows. These constraints keep pressure on the Dec/Apr and Dec/May bean oil structures.

Latin America added another macro headline as Petrobras signaled it may trim its 2026–2030 investment plan to roughly $106 billion, reflecting a more cautious long-term view on crude. This contrasts with Europe’s extreme distillate tightness but aligns with OPEC’s more balanced projections for 2026.

Asian markets remained calm, but advanced biofuels pricing in Europe delivered the most important signal. With UCOME at $1,502/mt and HVO Class 2 near $2,501/mt, the $1,000/mt spread renders HVO blending into European diesel uneconomic and fully shuts the Asia-to-Europe HVO arbitrage. By contrast, SAF economics remain compelling. European SAF prices are trading at extreme premiums due to tight kerosene balances and mandate-driven demand, which means Asia may still find Europe an attractive SAF destination even as the HVO window remains firmly closed.

Overall, today’s biodiesel market traded as a direct expression of diesel tension: a $69.75/mt front-month blowout, heavy Week 46 paper repositioning, tightening waste-based grades, and a global vegoil complex increasingly shaped by Indonesian expansion, EUDR uncertainty, and Argentina’s mandate reduction. With WASDE arriving tomorrow and U.S. river logistics deteriorating, volatility remains elevated heading into winter.