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.

Wed 7Nov2018: ICE Gasoil jumps to $699 as Nov/Apr backwardation explodes to $29.25/mt. HO cracks also exploded on the higher side to $32.23/Brl while gasoline cracks were unchanged. EU situation on RME has gone out of control with spot premium now at +$662/mt while Q4 printing +585. FAME premium still showing no signs of follow through with Q1 at +150 and Q2 at +165. Argentinian made a strong presentation to EU commission on taking any additional measures on Biodiesel imports after last Sept de-registration – the commission is supposed to make a final ruling by end of Nov. On the US side, margin improved slightly together with HO values as Bean oil having a hard time to recover – Brazil is now considering an export tax regime like Argentina. OPEC now organising a timely meeting just after mid-terms to realign production – it would seem that coast is now clear for Brent to return to $80.

Mon 5Nov2018: Gasoil sitting now on 200DMA @682 ahead of US midterms while Nov to April backwardation nearing $18/MT while RSI in low 50’s. Although Gasoline crack well below $10/brl, we note that Heating Oil crack remains at $29/brl enabling 3:2:1 to still print $14.90/Brl. US Biodiesel margins have improved only slightly thanks to improved RINs value at 36 cpg while BOHO has narrowed significantly with the engineered big drop in flat price of diesel ahead of elections in US. BOGO has improved at least $13/MT while EU premium, particularly in RME, show improvement beyond such consideration now trading spot close to +600 while Q4 still showing values of +485. FAME on the other hand is trading at 435 discount to RME in the spot and 325 discount for Q4. More meaningful is that the back of the curve on FAME is showing very depressed value for q1 at +150 which does not make any sense considering that even POGO has improved at least $50/MT in 2 weeks. On the FOREX side CNH has remained stable @6.91 despite the very acrimonious trade discussions. INR has stabilised after the big drop in crude these last 2 weeks before US elections. We can expect that post elections and Iran sanctions, there will be little to hold down crude prices.

Wed 24Oct2018: Gasoil breaks lower in line with Crude down to $695/Mt with backwardation to Nov/Apr widening again to $15.50/mt. RSI now back to a possible bounce levels at 55.85 but unlike Crude, gasoil has no broken the 200dma level. Crack margins for HO still at record high. US Biodiesel margins go even more negative despite improved BOHO levels but weak Biodiesel RINs value @32cpg still being pressured by the Ethanol RINs. IN EU RED RME goes to +505 in the spot market while Q4 offered at +435ish. RED FAME trading at 255 discount in Q4 while for Q1 2019, the spread is only 140 discount. Precipitation forecast for Europe looks a bit better for central and SouthEast Europe to improve Danube navigation but still rather dry to upper Rhineland. Brazil is bracing for decisive elections this coming week-end closing a bit weaker at 3.73R/$. China situation remains pretty much frozen at 6.94 while INR a bit improved at 73.36.

  HO Crack:  

Mon 22Oct2018: Gasoil moves a bit higher at $716 as backwardation to Apr19 widens to +$14/mt. Heat crack margin also moves higher to $28.45 telling us something is up as Nov WTI futures expires signalling end of a weakening trend. US Biodiesel still marred by poor margins despite increase in HO but D4 RINs following depressed state of ethanol RINs as impact of E15 weighs on market. 15 days to midterms that will set the tone for RVO (Renewable Volume Obligations) by end of Nov. In EU, situation with Rhine river causing logistical nightmare for supply chain of all refined products. RED RME spot has gone to +500 while Q4 offered at +405 and spread over RED FAME now 240/mt. Crop progress shows that we just went over the hump on Soya with 53% harvested; now storage for the remainder of this crop will be critical and would expect continued pressure on basis and then futures. BOGO ended today at -69/mt while POGO at -$161 and expect continued pressure on both despite exceptional arbitrage into EU. On the forex front, we are probably not too fare for CNH to reach 7 while Indian Rupee still vulnerable to Crude prices. In South America, the Brazilian Real is defying all expectations of emerging markets with a strong rebound to 3.67 ahead of elections next week end.