European biodiesel premiums look set to continue the upswing of the past month into a strong fourth quarter as signs that cheaper fuel are stoking above trend demand growth conflict with a tightening domestic feedstock supply pool. In contrast with the oversupplied world mineral oil market, European rapeseed forecasts are continuing to suffer downgrades, with France this week shaving another 100,000t from its monthly forecast to reduce the national rapeseed crop to around 90% of last year’s size. USDA’s FAS tips EU rapeseed oil output to drop nearly 5% from 10.251mn t in the current marketing year, still lagging the projected 12% slump in EU rapeseed oil production. Industrial consumption of rapeseed oil, which will consist largely of biofuel fuel sector demand, is expected to remain steady through the new crop year at close to this year’s 7.2mn t, or nearly 70% of the bloc’s output.
French diesel consumption meanwhile is showing signs of life after several moribund years, with June demand surging 26% MoM to hit 3.4mn t and smashing recent monthly highs. France’s consumption of predominantly rapeseed oil-based biodiesel will be up in line with the stronger diesel offtake as blenders keep pace with the country’s 7.7% blending mandate.
An expanding EU dairy sector has driven record rapeseed crushings this year, and with faltering EU rapeseed oil output tightening the domestic market, USDA expects crushers to substitute into a more abundant soybean market to satisfy strong meal demand. Biodiesel refiners are likely to be at the head of the queue for any increase in domestic soybean oil supply as they seek out blending substitutes for pricey rapeseed. EU palm oil imports also look set to climb after nearly doubling in the first ten days of August MoM, with ENI’s recently converted 350,000t/yr Venice HVO refinery providing one likely new bulk consumer.