Year End Markets Close with Caution

Today being New Year’s Eve, I want to wish everyone a Happy New Year while still closing out the year with a proper market read. Liquidity was thin and participation light, but price signals across energy, feedstocks, policy, and biofuels remain consistent.

The year over year comparison frames the setup. ICE gasoil trades near 619 today versus roughly 680 at the same time last year, a decline of about 9 percent. Energy weakened through 2025. Feedstocks did not follow. Soybean oil sits at 48.20 today versus 47.84 one year ago, effectively flat on a yearly basis. This divergence between softer energy and stable vegoil remains the primary driver of biodiesel economics.

Spreads adjusted accordingly. One year ago, BOGO traded near +304. Today it stands closer to +443. This expansion reflects falling gasoil rather than rising feedstocks. Biodiesel premiums moved higher to defend margins in a lower energy environment. The same pattern holds across the barrel stack. Last year at this time, RME traded around +565 over ICE gasoil, FAME near +482, and UCOME close to +715. Those levels already reflected tightness, and 2025 reinforced that structure rather than unwinding it.

HVO Class 2 remains the most notable outlier. Its flat price continues to trade well above conventional biodiesel. This gap is not driven by feedstocks. It reflects regulatory preference, blending concentration, and limited availability of drop in barrels. HVO pricing now sits outside traditional biodiesel logic and trades on access and compliance value, a gap that widened through the year.

Macro moves add context. Gold trades near 4,372 versus roughly 2,809 one year ago, highlighting persistent demand for hard assets. The euro strengthened from about 1.05 to 1.1772, lifting dollar denominated ARAG flat prices even when euro prices held steady. These forces supported biodiesel flat prices despite weaker energy.

In the U.S., policy shifted from background risk to direct price input. Changes to the 45Z tax credit take effect immediately. The base credit for SAF steps lower, while fuels made from feedstocks grown outside the U.S., Mexico, or Canada lose eligibility. Removal of ILUC penalties improves economics for ethanol, biodiesel, and renewable diesel produced from domestic feedstocks. This favors U.S. biodiesel and renewable diesel relative to imported pathways. D4 RINs reflected this adjustment, with Dec 26 futures trading near 1.117. The market is reassessing forward compliance value rather than pricing demand erosion.

We close 2025 with lower gasoil, stable vegoil, elevated biodiesel premiums, and a clear hierarchy in the barrel stack led by HVO. What stands out is that markets continue to price scarcity even as crops are abundant. This signals a cautious market focused on policy risk, compliance access, and effective availability of qualifying barrels rather than headline agricultural supply. Going into 2026, this caution remains central to price formation.