We have been in uncharted territory as Indonesia pushes forward with their 40% blending requirement by Jan1 despite the fact that Palm oil premium Vs diesel is nearly +$431/mt. Still no word how this will be financed by the Indonesian export levy that is trailing this premium. Palm consumers already shy away from Indonesia high export prices as they rather lift Malaysia cargoes as reflected by lower stocks there. This Palm story remains an important story affecting world vegoil as palm oil is the highest yielding and lowest cost per metric ton oil. Palm is now one of the most expensive vegetable oil in excess of $1275/mt or $30/mt premium over Sunflower Oil. In Northwest Europe, soybean oil continues to dig a discount Vs Rapesed oil as it is now $68/mt cheaper at $1102/mt, still the cheapest soft oil in Europe. Notably all soft oils are in backwardation in Europe of at least $10/mt per month. Spot RME barges traded flat prices at $1331/mt reflecting a gross replacement of $145/mt while UCOME barges traded at $1432/mt reflecting gross margin of $232/mt. In US uncertainties on the 45z continue as Treasury set themselves a deadline of Jan20 to give guidance - this means most producer will prepare to switch to the producer credit this Dec (maintenance & feedstock management) but generally speaking unlikely to produce in 2025 until guidance is given. In this IRA uncertainty, D4 RINs are doing the work of providing necessary RFS incentive climbing to 0.725 c/gal. This trend will be welcomed by foreign producers who are EPA approved RINs generators but NOT eligible for 45z. The best outcome for foreign producers exporting to US would be an absence of 45z guidance and no BTC which could explode RINs value and upset a lot of small/independent US refiners who are obligated parties under the RFS mandate.
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