September Pricing Analysis

SUMMARY

September was another fossil-led month. Front-month Singapore jet rose 15.0% MoM and gasoil 10ppm 14.4% as attacks on Saudi energy infrastructure tightened an already strained middle distillate market. Renewables followed at roughly half the pace and then gave back most of the gains in the second half.

Product Trends

SAF Neat HEFA Malacca Straits FOB averaged $2,823.46/mt in the month of September, a +7.3% MoM (+$192.18) increase compared to August. It opened at $2,798.50 (1 Sep), peaked at $3,018.25 (15 Sep) and closed at $2,666.25 (30 Sep).
HVO Class II Malacca Straits FOB averaged $2,893.52/mt, +3.4% MoM (+$95.41), its highest monthly average in 13 months. It opened at $2,813.75 (1 Sep), closed at $2,831.50 (30 Sep), and rallied $449 from its 8 Sep low to a $3,118.00 high on 15 Sep.
HVO Class IV averaged $3,372.78/mt, +6.1% MoM and +38.2% YoY, also a 13-month high.
Both products were seen rising with the fossil complex towards the middle of the month before unwinding most of the initial increase in the second half of the month. Companies tend to benchmark SAF and HVO as a spread to jet and gasoil, which would explain why these products mirror the movement seen in the refined products market.

Feedstock Trends

UCO Straits FOB averaged $1,196.25/mt, +0.9% MoM (+$11.25) and +8.1% YoY. It closed at the month's high of $1,205/mt, its seventh consecutive monthly gain since February.
UCO East China averaged $1,197.50/mt and closed at $1,200/mt, $5.00/mt below Straits, reversing July when China closed above Straits.
Biofuel feedstock prices in Asia are supported by both domestic and international demand, especially with profitable margins that are possible from exporting the finished product to Europe despite the hefty anti-dumping duties in place on China.
CPO Singapore Straits FOB (USD) averaged $1,159.75/mt, +0.3% MoM (+$3.70), but slid 5.0% from $1,177.22 (1 Sep) to a month low of $1,118.67 (29 Sep).
Palm oil is primarily priced as an edible oil first before a biofuel feedstock, and even so is considered as a high Indirect Land Use Change (ILUC) risk feedstock in Europe. Its use in biofuels is mostly narrowed down to within Southeast Asia, countries such as Indonesia and Thailand who have no aversion to palm as a biodiesel feedstock. Lower prices are seen as part of expectations on rising Malaysian output and weak exports which weakens its price on an edible oil basis, and weaker crude futures towards the end of the month making it a less attractive biodiesel feedstock.

CROSS-MARKET DYNAMICS

The fossil leg rallied hardest again. The HVO premium narrowed, and the SAF premium held on average but fell into month-end.
Singapore jet averaged $1,348.00/mt (+15.0% MoM) and gasoil 10ppm $1,330.73/mt (+14.4%), peaking on 11 Sep and 16 Sep respectively.
Houthi strikes halted the 400,000 bpd Jazan refinery.
A follow-up hit the East-West Pipeline with Saudi Arabia’s cancellation of some September crude cargoes to European buyers.
HVO green premium (HVO Class II minus gasoil 10ppm) averaged $1,562.79/mt vs August's $1,633.97 (−4.4%), closing at $1,541.00. The premium has now alternated direction for three months: narrower in July, wider in August, narrower again in September.
SAF green premium (SAF minus Singapore jet) averaged $1,475.46/mt vs August's $1,465.95 (+0.6%). It fell from $1,564.02 (1 Sep) to $1,337.65 (30 Sep) as SAF retraced while jet held above $1,300/mt.
RED UCOME China FOB netback to NWE averaged $1,441.76/mt (+9.1% MoM). Its spread over UCO East China nearly doubled to $244/mt from $131/mt, a sign of stronger European pull on Chinese UCOME.

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