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Spectacular oil rally tightens bean oil/gasoil spreads

Front month beanoil/gasoil spreads have broken below $140/t this morning after crude led gasoil’s spectacular rally onThursday, with front month prices bouncing $30/t or nearly 7%. Annualised 3.7% growth in the US economy offered some support to vegetable oil markets, but crude oil also received a supplemental uplift from Shell’s force majeure on Nigerian crude oil, triggering a wave of short covering.

gasoil bounce
Gasoil bounced sharply on Thursday in line with a sharp crude oil rebound triggered by strong US economic data and disruptions to Nigerian crude pipelines

Intergrade spreads in EU biodiesel meanwhile have tightened after ballooning mid-week, as feedstock spreads have started to even out. Rapeseed oil spreads to palm oil are back at $310/t, nearly $30/t down from mid-week highs, with rapeseed oil spreads to soybean oil at $160/t.

Despite a two day rally in palm oil which has narrowed spreads to rival vegetable oils, the Asian market remains cautious over Chinese demand prospects with regional stockpiles already high. Malaysia and Indonesia yesterday announced they would join forces to prop up smallolders suffering near 25% peak to trough losses since early June.

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