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Brazil 1Q tallow exports triple on long-term contracts
Brazil 1Q tallow exports triple on long-term contracts
Sao Paulo, 22 April (Argus) — Brazilian beef tallow exports totaled 73,930 metric tonnes (t) in the first quarter, a three-fold increase from the same three-month period in 2023 on rising demand. Almost 93pc of outflows between January and March were shipped to the US, according to data from Brazil's trade ministry. Long-term contracts explain the rising flow of exports, even though spot market arbitrage was closed throughout the first quarter (see chart) . The price of tallow in the Paranagua and Santos ports was $960/t fob on 19 April, keeping the arbitrage closed to US Gulf coast buyers, where the reference product was at $901/t on a delivered inland basis. Brazilian tallow is also negotiated at a premium against soybean oil, which closed at $882/t fob Paranagua on 19 April. This scenario has been observed since the 1 December 2023 start of Argus ' tallow export price assessment. Historically, vegetable oil in Brazil was traded at a discount to tallow, but strong demand has boosted the price of animal fat. Some biodiesel plants have been purchasing used cooking oil (UCO) or pork fat as an alternative. In 2023, there were doubts about whether the outflow of tallow from Brazil would be constant. Market participants now believe that the 2024 start of operations at new renewable diesel refineries in the US should sustain exports. Local suppliers that have already signed supply guarantee contracts — some up to three years — with American buyers are also considering export opportunities with Asia, including a new renewable diesel plant in Singapore that could receive Brazilian cargoes. Expansion projects are propelling US demand, including work that would bring capacity at Marathon Petroleum's Martinez Renewables plants in California to 2.35mn m³/y (40,750 b/d)and the Phillips 66 Rodeo unit in northern Californiato 3mn m³/y. These and other new projects will increase annual US demand for tallow by 5mn t. Maintenance on the horizon Maintenance at US refineries has Brazilian sellers bracing for a short-term drop in prices. Between May and June the Diamond Green Diesel (DGD) unit in Port Arthur, Texas, will shut down for maintenance, a stoppage that could impact demand for Brazilian inputs. Market participants have already observed a slight increase in domestic tallow supply, a change they attribute to maintenance at DGD. The advance of the soybean crop in Argentina is also expected to increase the supply of feedstocks to North American plants, as some refineries are returning to soybean oil after a hiatus of several years. The soybean oil quote on the Chicago Board of Trade (CBOT) is an important reference for the price of tallow. By Alexandre Melo Renewable feedstocks in Brazil on fob basis R/t Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Colombia's electricity woes add to unrest against Petro
Colombia's electricity woes add to unrest against Petro
Bogota, 22 April (Argus) — Colombians took the streets of major cities and towns across the nation on Sunday to protest mainly against health, pension and labor changes, but potential power outages are also creating discontent. Authorities estimated that about 250,000 Colombians marched in widespread protests, sparked by changes in healthcare. Congress in April had rejected President Gustavo Petro's proposals in the sector, and the government the next day seized the two largest private-sector health insurers. Protesting healthcare workers say the government did this to implement changes through a back channel. "Regulatory noise and risk are likely to remain high amid announcements, proposals, and measures [that do not require congressional approval], aimed at changing the game's rules in strategic sectors," brokerage Credicorp Capital said. Colombians also protested being on the verge of electricity rationing like that in neighboring Ecuador as hydroelectric reservoirs remain at record-low levels. Several unions and other associations have long warned the Petro administration to take measures to offset the effects of the El Nino weather phenomenon. Electricity distributors last year called for allowing bills for energy purchased on the spot market to be deferred and for loosening price index rules, among other proposals. The national business council sent at least three letters to the president on the issue. At least nine separate letters calling for preparation to prevent blackouts were sent to the president and ministers. Several actions were only recently implemented . "There are no risk of electricity rationing in Colombia," former energy minister Irene Velez said in 2023. "We do not understand why some people are interested in generating panic." Government weather forecasts also overestimated rainfall expected for March, leading hydroelectric plants to use more water in the reservoirs than they otherwise would have, said director of the thermoelectric generation association (Andeg) Alejandro Castaneda. Reservoir levels stood at 29.5pc today, rising thanks to rains since 19 April, up from 28.75pc on 18 April. Electricity rationing is set to begin when reservoirs drop below 27pc, according to grid operator XM. By Diana Delgado Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
German products demand up on supply concerns
German products demand up on supply concerns
Hamburg, 22 April (Argus) — German demand for heating oil and fuels rose sharply in the past week, with consumer concerns that conflict in the Middle East could restrict product availability were coupled with falling domestic product prices. Spot trade of heating oil, diesel and E5 gasoline submitted to Argus reached their highest weekly averages since the start of the year. The last time this amount of heating oil was traded was in December last year, and for gasoline and diesel it was at the beginning of October. Gasoline demand surged particularly in the Emsland and South regions, and middle distillates were primarily traded in Rhine-Main and Southwest. The missile attack by Iran on Israel on 13 April and Israel's drone attack on Iran on 19 April have heightened concerns of further escalation. An open conflict between Iran and Israel could affect supply of crude and gasoil from the Middle East by threatening major shipping routes of the Suez Canal, the strait of Hormuz and the eastern Mediterranean. These concerns led some German consumers to fill their tanks. Concurrently, product prices have fallen across Germany, further stimulating demand. Refineries in Karlsruhe and Neustadt-Vohburg have drawn buyers with fuel oil and gasoline prices below the German average. Heating oil at Miro's 310,000 b/d Karlsruhe traded at more than €2/100l below the national average, while gasoline at Bayernoil's 216,000 b/d Neustadt-Vohburg traded at a discount of almost €6/100l to the same average. By Johannes Guhlke Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US biodiesel faces poor production economics
US biodiesel faces poor production economics
Houston, 19 April (Argus) — US biodiesel producers are facing worsening production economics, as evidenced by a deteriorating correlation between the soybean oil-heating oil (BOHO) spread and biomass-based diesel D4 renewable information number (RIN) credits. Historically, tighter values in the BOHO spread, an indicator of soybean oil-based biodiesel production margins, have applied downward pressure to D4 RIN values, as biodiesel producers change their credit position, depending on the economics of their operation. But rising renewable diesel production has swelled the supply of D4 RINS, reducing credit values and making it harder for producers to monetize RIN credits, as the correlation between the two production factors deteriorates. Regression analysis measuring the effect of the BOHO spread on the next month's D4 price shows a decoupling of the relationship in recent years, with BOHO in the last two years about half as predictive of the change in D4 credit prices as it was in the years since 2016. The least correlated periods were in the fourth quarter of last year and the first quarter this year. In those quarters, the predictability of the BOHO spread came to 32pc and 34pc, respectively, meaning they were not predictive. The drop coincided with falling credit prices as substantial growth in renewable diesel production oversupplied the D4 RIN market. Unlike biodiesel, renewable diesel draws from a more diverse pool of feedstocks including beef tallow and used cooking oil, making renewable diesel production economics less dependent on soybean oil. D4 RINs have fallen at a faster rate than BOHO over the last year. D4 credits averaged 58.2¢/RIN in the first quarter, down by roughly two-thirds on the year, while BOHO narrowed by 49pc to 79.64¢/USG in the same period. D4 RIN equivalence, a 1.5x multiplier applied to the RIN value that factors in the amount of generated RINs/USG of biodiesel produced, averaged a 7.66¢/USG premium to BOHO in the first quarter, down from 87.73¢/USG a year earlier, leaving producers less room to profit from producing biodiesel. D4 RIN equivalence ended the first quarter at a discount to BOHO, averaging 9.6¢/USG less than BOHO from 6 March-31 March, and obligated parties have had trouble recouping production costs using RINs. Current production fundamentals could force smaller soybean oil-based biodiesel producers to reduce output in the second half of the year, as some producers have not reached purchase agreements for that period, according to market participants. Some facilities have closed. In March, Chevron REG announced the closure of two biodiesel plants in Wisconsin and Iowa "due to market conditions." By Payne Williams and Matthew Cope D4 Prices Vs BOHO Spread $ Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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