News of a surge in ULSD exports from Russian Baltics in December to 1.4 million metric tons, a 23.2% increase over November, took the market by surprise. This is leading to a collapse of backwardation in NWE, which we should expect to be amplified by EU political uncertainties in general. The barge spot market for biodiesel in Northwest Europe was relatively quiet and directionless, with a slightly lower flat price and slightly higher premiums. Gross margins for RME widened a bit to $161/mt as soft oils retreated. That was not the case for palm, but still, the 3rd month POGO is stuck at +$384, just a bit over the export tax levy of $375/mt, which has now been extended to exports of UCO and palm oil effluent—both feedstocks for biodiesel. Malaysia is forecasting lower stocks at 1.8 million MT, which is a reflection of consumers avoiding Indonesia's higher prices, meaning that palm stocks in Indonesia are still building while B40 implementation vs. current B35 is a fixture of imagination at the moment. Meanwhile, in the US, soy crushers announced record levels of crush at 215.6 million bushels for October and slightly higher oil stocks vs. last year at 1.485 million lbs, once again confirming that soyoil demand is tepid at best. In other important news in the US, the Treasury denied that it would not provide guidance for 45Z. It promised to issue such guidance after a multi-agency review before Biden's end of term—let us see. In the meantime, from a production perspective, that means at least one month shall be lost, or approximately 500 million gallons (1.5 Mil MT), if everything goes perfectly in Washington DC. Lastly, the Baltic Dry Index continues to dive as freight is adjusting to lower levels, which we are starting to see reflected in fixtures. This may be related to the devaluing RMB (7.26) and Indian Rupee (84.72) vs. US$, perhaps anticipating increased US tariffs and trying to keep their goods competitive.
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