The price differential between gasoil and bean oil, a key indicator in determining the relative performance of the vegoil complex versus mineral oil, eased during Thursday trading, after hitting a near four-month high at Wednesday's close, according to S&P Global Platts data.
The BOGO relationship, measured as the price differential between the CBOT soybean oil futures contract and the ICE gasoil futures contract, raced to a $322.88 premium over ICE gasoil Wednesday, the highest since May 11 when soybean oil ended at a $325.18/mt premium over gasoil.
Market sources saw BOGO-related futures and swaps trading around $307/mt Thursday.
"Vegoils are tight, and they feel tight across the board," one source said.
PME prices have seen support in recent weeks as a strong export program and good Chinese demand saw values surge, while RME prices in the European region have been buoyed by a tight supply of rapeseed. For soybean, weather forecasts have fired expectations of a bumper crop in North America, but good demand is likely to still overpower available supply. In May, the German Union for Promoting Oil and Protein Plants (UFOP) estimated consumption at 328 million mt, versus demand at 324 million mt.
Soybean oil hit its highest premium to gasoil back in April, when it reached a premium of $436.24/mt over gasoil April 5. Since then it has fallen back, before starting to widen again from May 23 onwards.
Platts launched the assessment in July 2013, with much of the early data showing soybean oil trading at a hefty discount to gasoil. However, since the collapse in oil prices from late 2014, the relationship has comprehensively reversed, fundamentally rewriting much of the economics underpinning the biodiesel market and marking out renewable fuels as relatively expensive versus their mineral equivalent.
