In the latest update from the biodiesel market, significant movements were observed in the European Union (EU) biodiesel and feedstock markets, primarily influenced by recent fluctuations in the low-sulfur gasoil (LSGO) price. Following a spike in LSGO prices linked to escalating tensions in the Middle East, market dynamics shifted, prompting refiners and fuel suppliers to potentially increase the biodiesel proportion in their blends.
As of October 7, LSGO prices surged by $63 per metric ton (mt) to reach $727/mt, driven by warnings exchanged between Israel and Iran regarding potential threats to their oil infrastructures. However, a notable decrease was observed the following day, with prices dropping to $696/mt on October 8, following reports of a possible ceasefire between Israel and Hezbollah. Despite this decline, LSGO prices remain higher compared to the previous week.
The rise helped biodiesel outrights and the recent drop widened the premiums over LSGO. In particular, the price of UCOME (used cooking oil methyl ester) rose by $135/mt to $1,414/mt, with its premium increasing by around $100/mt to $718/mt. Similarly, RME (rapeseed methyl ester) saw an outright increase of $103/mt to $1,260/mt, and its premium rose by $71/mt to $493/mt. FAME0 (fatty acid methyl ester) prices increased by $76/mt to $1,128/mt, with its premium up by $47/mt to $435/mt.
These developments have spurred an uptick in demand for feedstock, including imports, as processors move to secure margins and maintain market momentum. However, there are concerns among market participants that the current activity may be primarily influenced by a “war premium” rather than fundamental market conditions, which have yet to provide a solid justification for the increased valuations. The impact of news regarding peace talks has already shown a cooling effect on LSGO prices, indicating that ongoing developments in the region could lead to further volatility.
In other news, the U.S. imported nearly a record volume of used cooking oil (UCO) in August, totaling 246,000 mt, which marks a 23% increase from July. The majority of this volume originated from China. However, Chinese market participants are expressing concerns about a potential slowdown in U.S. UCO purchases due to the proposed “Farmers First Fuel Incentives Act,” which aims to promote the use of domestic feedstocks, such as soy oil, for biofuel production.
For real-time biodiesel prices, visit Vesper.
