Low-carbon fuels are entering the second half of 2026 with firmer price support. But production capacity alone is no longer telling the full story.
Higher diesel values following Gulf supply disruptions are supporting margins for hydrotreated vegetable oil (HVO) and US biomass-based diesel. In Europe, RED III obligations and year-end compliance requirements are also increasing demand for renewable fuels.
At the same time, physical and regulatory constraints are playing a growing role in determining where fuel moves and what it is worth.
Low water levels on the Rhine are limiting inland transportation in Germany ahead of the end-of-third-quarter blending season. Planned maintenance at Neste facilities in Porvoo and other regions could remove roughly 400,000 metric tons of production during the second half of the year. Meanwhile, competition for traceable waste-based feedstocks continues to intensify.
Those pressures are already influencing trade. Waste oils and finished fuels are moving toward markets where they can capture the strongest combination of economics and compliance value.
The changing economics of used cooking oil (UCO) offer a particularly clear example. The spread between HVO and UCO climbed from roughly $600–$700 per metric ton in early 2025 to more than $2,000 per metric ton in April and May 2026 before easing to approximately $1,500–$1,800 per metric ton. By comparison, the spread between UCOME and UCO has remained relatively stable.
The divergence suggests that HVO producers have been able to capture substantially stronger conversion economics from the same feedstock. This has been supported by demand for renewable diesel and sustainable aviation fuel. That could increasingly pull UCO toward HVO production while adding pressure to UCOME margins.
Other market signals point to the same broader conclusion:
Chinese UCOME exports are responding to a more workable European import arbitrage.
The US D4 RIN market continues to face a sizable second-half deficit despite high utilization of biodiesel and renewable diesel.
Bio-bunker activity is shifting between Rotterdam and Antwerp as regulatory frameworks reshape incentives.
In Japan, a proposed reduction in the country's 2030 SAF mandate could ultimately free up more domestic production for export.
Across these markets, the common thread is increasingly clear: near-term pricing will be shaped not simply by how much production capacity exists, but by logistics, compliance rules, feedstock eligibility, and where molecules carry the greatest value.
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