August Pricing Analysis - European Biofuels

SUMMARY

FAME0 NWE FOB rallied 6.4% MoM on average (15.0% close-to-close) in August. Strait of Hormuz tension, Russian export disruption and Red Sea rerouting of middle-distillate cargoes, fed through to the diesel benchmark, against which the biodiesel complex is priced. The move was pass-through rather than biodiesel-specific: the diffs to LSGO for FAME0, RME and UCOME all narrowed or held flat even as flat prices surged. UCOME held its structural premium and its production margin over UCO widened 36% to $403/MT as the feedstock stayed flat; standing compliance-demand support (post double-counting abolition) helps explain UCOME's relative resilience. RME broke from that pattern, flipping from a $55/MT average premium to a $5/MT discount versus FAME0 at month-end. The forward curve confirmed the diesel-driven, near-term nature of the move: bull steepening with M1-M12 widening to $294/MT as the front rallied nearly 3x harder than the back. FAME0's realized volatility hit a 6-month high (CV 4.19%), and late-month commentary on Iran-Oman diplomacy raises a real, if unconfirmed, risk that the fossil-side rally reverses into September.

PRICE ACTION

• Opened $1,480.25/MT (03-Aug), closed $1,713.75/MT (28-Aug, last available print), avg $1,583.50/MT vs July's $1,488.15/MT (+$95.35, +6.41% MoM); YoY average +17.32%
• Monthly high $1,713.75/MT (28-Aug); monthly low $1,480.25/MT (03-Aug); intra-month range of $233.50/MT, 1.7x July's $141.50/MT range
• Largest single-day move: +$67.00/MT (+4.49%) on 05-Aug, the initial leg of the LSGO benchmark rally; 26-28 Aug alone added $85/MT (+5.3%) as the spike accelerated into month-end

CROSS-MARKET DYNAMICS

• UCOME averaged $1,738.63/MT (+$155.13/MT premium to FAME0, Jul: +$150.28); premium narrowed to $127.50/MT at month-end as FAME0's late rally outpaced UCOME's
• HVO Class II averaged $2,866.76/MT (+$1,283.26/MT premium to FAME0); premium compressed to $1,206.75/MT at month-end.
• RME averaged a $55.13/MT premium to FAME0 but flipped to a $5.00/MT discount at month-end.
• FAME0, RME and UCOME diffs to LSGO all narrowed or held flat, confirming fossil-driven pass-through rather than biodiesel-specific tightness; HVO's diff widened +$27.43/MT, the outlier
• UCOME-UCO production margin widened 36% to $403.03/MT (Jul: $296.37/MT) as UCO NWE FOB held essentially flat ($1,335.60/MT vs $1,342.07/MT in July); standing compliance demand for high-GHG-savings grades (post double-counting abolition) helps explain UCOME's premium holding as feedstock cost stayed flat
• Tallow (Cat 1&2 NWE Ex Works) averaged $972.68/MT (+0.95% MoM), closing at a new period high of $1,013.00/MT. POME Oil NWE CIF was flat at $1,370.00/MT all month
• Ethanol T2 (EUR/m3) fell 10.2% MoM to €724.34/m3.

CROSS-REGIONAL DYNAMICS

• Asian/Singapore marine biofuel blends (B24/B30 UCOME-VLSFO) fell in the last week of the month on weaker crude, attributed to hopes that Iran-Oman diplomacy might soon reopen the Strait of Hormuz; this sits in tension with NWE FAME0/UCOME, which rallied hard into the same 26-28 Aug window on the LSGO benchmark spike.

CURVE STRUCTURE

• Bull steepening: M1 gained $249.75/MT vs M12's $85.75/MT; the front rallied 2.9x harder than the back
• M1-M12 backwardation widened $130.00 to $294.00/MT, consistent with the fossil-driven rally being priced as a near-term event rather than a structural repricing of long-dated biodiesel economics
• If Iran-Oman diplomacy advances toward a Hormuz resolution, M1-M2 should compress back toward its month-start level; if the disruption persists, the back reprices structurally

PRICE VOLATILITY

• FAME0's August CV (4.19%) exceeded the prior 6-month peak (March, 3.79%); UCO stayed contained at 1.12%, confirming the shock originated fossil-side, not feedstock-side
• Hedging models calibrated to the Apr-Jun 1.7-2.9% range are underestimating current risk; assume elevated CV (3.5%+) until the disruption resolves

SOMETHING TO WATCH

• M1-M2 spread as the diesel-disruption canary:
  • Observation: M1-M2 widened from $23.50/MT to $106.25/MT in August
  • Why it matters: late-August market commentary flagged Iran-Oman diplomatic efforts as a potential path to reopening the Strait of Hormuz; if that advances, the fossil-driven spread should compress
  • What to monitor: weekly M1-M2 close; LSGO futures term structure; Hormuz shipping/diplomacy news
• RME vs FAME0 spread as the grade-divergence canary:
  • Observation: RME flipped from a $55/MT average premium to a $5/MT discount at month-end
  • Why it matters: a sustained discount marks a genuine regime change in relative RME demand; a snap-back suggests a one-day dislocation
  • What to monitor: daily RME-FAME0 spread through early September
• Neste Rotterdam maintenance as the HVO/SAF supply canary:
  • Observation: Neste's Rotterdam renewable-diesel facility begins 8 weeks of maintenance in Q4 2026; Neste's renewable-production utilization ran 71% in H1 2026, down from 80% YoY
  • Why it matters: a further utilization slip into Q4 tightens European HVO/SAF supply just as the maintenance outage begins, a genuine forward risk distinct from August's price action
  • What to monitor: Neste quarterly utilization updates; HVO Class II NWE forward curve (Q4 tenor) through September

Note: All figures, prices and market activity referenced in this report are based on the period covered by this monthly update.

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