Biodiesel premiums to the underlying ICE gasoil futures in Europe rose steeply Monday, as energy prices tumbled further after Friday's OPEC meeting, and supported by high feedstock prices.
The RED RME premium Monday hit its highest since Platts started assessing RED-compliant biodiesel since February 2012 and beating the previous record of $494.75/mt last Thursday. The premium was assessed $512.25/mt, up $20.50 on the day, breaking above the $500/mt ceiling for the first time.
Meanwhile, the RED FAME 0 premium showed a similar response to the falling ICE gasoil futures and reached a four-month high of $410/mt, up $14.25 on the day. The premium was last assessed at the same level on August 28.
Global energy prices lost ground over the past week, following data release by the US EIA Wednesday which showed that petroleum stocks and the US dollar index reached their highest since 2003.
The downward move was given further momentum Friday's OPEC meeting in Vienna, in which the oil producers' group effectively decided to keep its high production unchanged after failing to agree on a figure for a production ceiling.
"The falling knife of the gasoil" hit the biodiesel market hard on Monday, one source said.
The December ICE low-sulfur gasoil contract fell $21.75 during Monday's trading and was assessed at $373.25/mt at Platts 16:30 London time close, and was last lower on March 12 2009, when it was assessed at $368.50/mt.
The rise in the RME biodiesel premium was further supported by continuous strong rapeseed oil prices, following the upward trend in global vegoil prices. Spot RME production margins turned negative over the past week, forcing some producers to cut down their output.
"The key is purchasing feedstock well in advance -- but looking ahead, we might reduce our runs as well, if margins stay so low," the source added.
European buyers took a step back over the past week making them hesitant to overblend for the 2015 mandate as biodiesel became gradually more expensive than conventional diesel.
"Normally you see more spot demand in December, but not this year," a source said. The majority of "blenders are more or less balance on their quota -- and they will blend the minimum for now," the source added.
