Biofuel complex rocked by volatility in underlying fossil markets

SAF and renewable diesel outright prices hit multi-month highs following the outbreak of war in the Middle East on Feb. 28, driven by strength in the underlying fossil contracts which they are priced against.

There is often a lag between movements in the underlying fossil contract and the corresponding adjustment to bio-premiums, European biofuel traders said.

 As of March 6, the downward momentum for premiums had not mitigated the drastic increase in underlying fossil fuel products, leaving market participants unsure of when, and to what extent, biofuel prices will soften.

Elsewhere, biodiesel and ethanol markets have seen mixed reactions to the increasing fossil market volatility, and disruption to shipping through the Strait of Hormuz.

Prices

• The front-month ICE low sulfur gasoil futures contract settled at $1,156/mt on March 6, up 54% from Feb. 27.
• The Platts Jet CIF NWE cargo hit a record high on March 6 at $1,476.50/mt, rising 78% since Feb. 27.
• Marine fuel 0.5% FOB Rotterdam barges also strengthened, rising 30% since Feb. 27, settling at $601/mt on March 6.
• Platts assessed the RD-A outright price at an all-time high on March 6 of $3,168.13/mt, up $301.88/mt or 10.5% from Feb. 27.
• The SAF CIF NWE cargo outright price jumped $452/mt, or 19.7% since Feb. 27, closing at $2,746.50/mt March 6.
• The T2 physical ethanol price rose Eur22.75/cu m on March 2, before reaching a weekly-high of Eur712.75/cu m on March 3, up approximately 4% from Feb. 27, before settling to around pre-war prices by the end of the week.
• Platts assessed the UCOME FOB ARA premium to ICE LSGO at a weekly-high on March 2, the first trading session since the conflict, at $542/mt, before retreating sharply to $325.75/mt on March 6, down 50.1% since Feb. 27 and reaching an all-time low.
• In the UK, current year Non-Crop RTFC started the week at a high of 24.95 pence/RTFC on March 2, before crashing 16% to 20.95 pence/RTFC on March 3 and remaining at that level to March 6, its lowest since launching in January 2025.
• Rotterdam-delivered B30 UCOME-VLSFO biobunker blend climbed to a multi-month high of $830/mt by March 6.

Trade Flows

• The hesitancy of ship operators to pass through the Strait of Hormuz was cited by traders as having only minimally dented EU supply and demand fundamentals for biofuel cargoes, as European production facilities satisfy the lion's share of domestic demand.
• Around 20% of European diesel and 50% of European jet fuel imports originate in the Persian Gulf, explaining why the underlying gasoil and jet contracts have surged so significantly following the outbreak of war in the region.
• Ethanol import flows to the European market are dominated by countries to the West rather than the East, mainly the US and South American countries.
• Ethanol arbitrage opportunities may still be constrained by rising local prices in these markets and global freight rates.
• Traders noted that demand for marine biodiesel in ARA could surge owing to the significant uptick in conventional fuel oil prices.

Production

• The war has not had a significant impact on global biofuel production capacity, with most supply for the European market either produced domestically, in Asia, or in the Americas.
• Many vessels carrying SAF from China, crucial for meeting the ReFuelEU mandate, had already opted for the transit route south of the Cape of Good Hope owing to prior instability in the Red Sea.
• European HEFA (hydro-processed esters and fatty-acids) refineries have been optimizing renewable diesel output since the beginning of 2026 owing to strong expected levels of European demand, backed by the implementation of fresh EU legislation (RED III) in key markets.
• Existing EU duties on Chinese produced biomass-based diesel have slowed exports from Chinese refineries over the last year.

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Renewable diesel

Ethanol