Last week, money managers raised their net short position in Chicago Board of Trade (CBOT) soybean oil futures more than 10,000 contracts, reaching their most bearish oil stance since May 2019, according to a recent Reuters article. Weak soybean oil values helped drag the bean oil/heating oil (BOHO) spread to its lowest level last week since December 2019.

When money managers collectively aggregate so much pressure on one side of trade, it can potentially lead to short covering. The BOHO spread increased 37 percent in the past week, aided in part by a rapid rise in soybean oil prices, which climbed seven percent during the same period.

A rising BOHO signals a more challenging economic environment for biodiesel and renewable diesel production. The market reacted by lifting RIN prices, also near record short-term lows. The D4 RIN jumped 18 percent in value over the past week, settling at 53 cents today.

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