Tue 15Jan2019: ICE gasoil down $7.75/mt to $559.75 as Brexit vote putting pressure on EU markets yet crude is higher this morning in Asia. Heat crack still a staggering $27.31/Brl while 3:2:1 remains at $13.71. In US Biodiesel production margin remain terrible for independent producers that are not shipping to California and govt shut down is making trading RINs very difficult as trade lacks EMS&EIA data. RINs traded lower at 50cpg. Meanwhile in EU, RED RME spot still at exceedingly high levels of +558 while Q1 showing +450 and RED FAME still at +260 spot and showing slight contango for q1 at +265. On the SouthAm side, it looks like we are growing a very large Soy crop despite inventories and Brazilian Beans remain cheapest in the world and with no El Nino this winter, it is hard to get bullish oilseeds with exception of Rapeseed. POGO currently down the curve only at -20/MT while BOGO at +75… almost a $100/mt spread but who dares sell BOGO which in my view is more sensitive to energy at this moment. On the Forex front not much news as negotiations btw US/China continuing and CNH stable at 6.75 while Indian Rupee still at 70.74.

Thu 10Jan2019: ICE gasoil bounces back to $565 as crude up almost 20% in the last 10 trading sessions and weekly has barely reached over its 100 day SMA and RSI is just above 42 – with strong mid distillate basis in Asia, I don’t see why we cannot reach back over $600 before end of month and perhaps reach over 50daySMA. In US 3:2:1 weekly cracks still strong only because of distillate at $26.77/Brl. WTI still showing $8.5 discount to Brent despite strong US exports, again a reflection of strong demand and not only US. On the US Biodiesel front margins have bounced back but still production margins quite a bit negative as RINs not doing the work while BOHO got 13centspergallon weaker because of HO move – I think we will see BO move higher imminently. Only thing working in US is California LCFS credit that remain strong with $191/mt trading yesterday. Meanwhile in Europe RME values still in backwardation with spot showing +485 while Feb is discounted $100. RED FAME values now showing +280 for Q2 while Q3 at +285 still leaving PME arb open to EU. On the currency front CNH at 6.85 while INR is at 70.38 – not much changed despite weaker USD mostly against Yen.

Tue 17Dec2018: ICE gasoil takes a tumble together with crude to $532.25 on continued weakness in energy although RSI is ready for a bounce and Brent structure returned to backwardation today despite an ugly trading day. 3:2:1 crack bounced higher to $16.20/brl while HO crack still showing super high level of $27.55/brl. Biodiesel margin in US quite terrible with BOHO now at 35-37cpg meaning that only sales to California with LCFS make any sense. News on the BTC remains scant as administration and Congress trying to leave town this week without shutting down the government. Meanwhile in Europe RME remains in backwardation with spot asking for +705 while Q1 showing +420. RED FAME is shown at +225 for next year season (starts Apr1) and RED PME trading $25/mt lower. News of China buying Beans overnight, together with lower tariffs on cars would indicate that things are progressing well on the China front. Both side eager to do a trade deal to avert any further economic slowdown and would not be surprised that we see something before early Jan. Tmrw is Fed interest rate day and USD index still sitting at a one year high of 97.028.

Mon 10Dec2018: ICE gasoil back down to $565 as Brent/WTI spread makes a large adjustment today back to around $8/brl instead of $10. Overall 3:2:1 crack remains adequate at $14.84/brl still buoyed by the Heating Oil crack that remains at $26.65/brl. Rhine situation in Europe improving and this is weakening basis and might have been a reason for weakness with ICE today although Dec expiring tomorrow and still showing $10/mt backwardation. OPEC meeting was actually pretty successful but we will all have to wait until the next driving season to find out. Gasoline prices in central US are now well below $2 per gallon with some posting $1.85 or 0.49 cents/litre (and you were wondering why everyone in US is buying the biggest truck they can buy while French drivers paying close to $6 per gallon!). Biodiesel margins in US currently terrible as Bean oil has improved dramatically with BOGO now trading at +$71/MT or Jan and not showing any slow down while 3rd month POGO is also improved at -$37/MT. US Biodiesel producers now waging a feverish campaign to get the Biodiesel Tax Credit approved and all is possible over next few weeks – the BTC has been approved retroactively the last 11 years without fail if it was not already in place. It should be noted that in early 2019, LCFS CI adjustment on Diesel has now caused a spike in LCFS credit that have now jumped to $200/mt ( California is now decidedly the biggest regional market for biodiesel). In EU, Biodiesel premiums have not changed much in the spot with RME still showing +$810 in the spot while RED FAME for q2 is showing a healthy +260 as EU decided to reimpose countervailing duties on imported Argentina Biodiesel at 25-34%. In addition to EU & US, Peru also imposed duties on Argentina Biodiesel and despite this, soy oil has had little set-back as essentially Argentina Biodiesel, like Indonesia Biodiesel will have to be used domestically.


Wed 5Dec2018: ICE gasoil rebounded to $580 as Brent reached back to $62 while 3:2:1 crack stays at $14.05/brl buoyed mostly by diesel demand (HO crack at $26.46/brl) as gasoline crack dropped back below $10/brl. The trade has welcomed the news on RVOs in a cautious fashion as small refinery waivers continue to be issued despite the headlines – this administration has not refused a single request. The question of co-processing in 2019 is also disruptive as clearly its impact is not well understood yet. Despite this, RINs have moved back up to 45cpg but this is much less than anticipated since BOGO is now +64/MT for Jan futures (it has moved from -$60 on Nov 1: this is a $120/MT move!) while POGO third month is -$46/MT. US Biodiesel margins are very poor at this moment as Heating oil still not high enough to compensate for the rise of Soyoil. EU RME premiums have moved higher again to +$867/MT over ICE gasoil on the spot while Q4 showing +480 showing how inverted this market is while RED FAME is showing nearby +225 and Q2 +265 in a contango as traders buying back of curve as clearly blending RME not exactly the best strategy for meeting the EU mandate although it would seem that many EU members scrambling to meet it before end-of-year which is only one of the reasons causing inversion. Although US/China have paused escalation of trade tariffs for now, we are clearly looking at a resumption of Soybean exports from US to China after Brazil enjoyed a record soybean export month in Nov of 5.1 Mil MT instead of their usual 2 Mil MT… This should continue to lift the soy complex.


Fri 30Nov2018: ICE gasoil continues to breakdown to $549 as Jan Brent expired today which is usually a reason for weakness. High crack margin on HO still at $25/brl while overall 3:2:1 crack at $14.69/brl – seems like all is well for refiners. Meanwhile the big news for US Biodiesel came out today with a 14.7% increase in the 2020 mandate for D4 and more importantly the unspecified category (D5) could provide an additional 720 Mil gallons already in 2019. The good news for biodiesel is mitigated by the co-processing that refiners will be able to do in 2019. BOGO and POGO are moving higher very quickly with March showing +76 and -24 respectively although as previously mentioned most of this strength comes from strong correction in energy. Meanwhile in EU, RME values remain lofty at +805 spot while q4 shows +725. RED FAME for Q1 now at +210 with a $15 contango to Q2. PME arbitrage remains open although announcement by Indonesia of doubling mandates for 2019 while at same time removing the $50/MT export levy should increase uncertainties in market. Argentina has made strong cases with EU and also in US for removal of CVD on account of changes in their export tax regime and we should be hearing from EU today while US has until next August to decide.

Tue 27Nov2018: ICE Gasoil follows crude lower and trading today @ 575/MT while backwardation of dec/apr drops to $11.50 with WTI 200dma crossing 50dma and RSI falling below 30 in oversold territory, but who wants to catch a falling knife? 3:2:1 crack margins has recovered and now trading at 14.98/brl while HO crack still showing $27.87. US Biodiesel production margins negative at -$40/mt as RINs pop to 49 of last week was not to be extended this week as D4 offered at 41cpg which seems incongruent with the BOGO move. BOGO now trading at +28…we have seen a move from Nov 1 from -60 to +28 or almost $90/mt mostly led by a sharp gasoil drop as bean oil values have only moved down by $20/mt. In EU the spread between RME & FAME finally closing in a bit to 653 as FAME finally moved higher with Q1 FAME now trading over +200. PME arbitrage now wide open. The election results make RFS reform rather unlikely in the new congress but agency interference will most likely continue. Trade is expecting RVOs on Nov 30.


Wed 21Nov2018: ICE Gasoil follows general retreat of energy (except Natural gas up 30%) down to $604 as traders nervous about decreased consumption in China and despite upcoming OPEC meeting. RSI on gasoil is now low at 37 as we have broken 200dma and 50dma doing quite a bit of technical damage but still feels like this was a forced sell-off as fundamentals really did not change at all. US biodiesel margins are now negative as BOGO rebounding to -$18/mt while POGO is now $104 despite news that Trump administration decided to not release RVOs with view of making a change to RFS in January. News that Chevron in Utah was issued a small refinery exemption by EPA did not add to the optimism on RFS. California on the other hand showed how successful biodiesel blending in Q2 has been by showing that up to 15% blends were achieved with renewable diesel being 10% of that. In EU the RME spot traded at +815 while FAME traded at +140 showing a spread btw RME/FAME of $575 for q4 and $315 for q1. Still remain rather positive that we should see a strong rebound in energy prices perhaps during upcoming holidays. Happy Thanksgiving all!

Mon 19Nov2018: ICE gasoil retreated to $635 in line with crude oil breakdown and after gasoil backwardation collapsing down to $10.25/mt to April but is rebuilding already at $13.25 since Nov expiry. HO crack remains very strong at $30.75/brl while 3:2:1 remains at $9.55/Brl weighted down by gasoline/naphta. Maintenance season should be winding down over the next few weeks and we should see a resumption of crude demand in US with higher Refinery usage rate which has been down about 10% this maintenance season. EU RME situation has gone completely out-of-control with RED RME premium now at +870 for spot while remainder of Q4 at +710 with spread with FAME at +325 for Q1. RED FAME trading at +140 for Q1. Obviously with POGO at -144 and BOGO at -25, there should be a large arbitrage for Q2 into EU for Palm Biodiesel but with FAME premiums at +155 only and low gasoil values, it limits optionality with SME until things get clearer on the imposition of countervailing duties. Will RME premium backwardation roll into Q2? All eyes now on EPA who should be unveiling the RVOs this week. We have a lot on our plates this next few weeks with OPEC meeting and also trade discussions btw US/China – my view is that we should see higher gasoil flat prices.