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Spot values for soy methyl ester B100 biodiesel arced higher early in the second quarter, with the advance running contrary to the petroleum-based diesel market that faded from March highs amid weak demand and as crude prices dropped back from more than $40 bbl in the face of stiff technical resistance and global oversupply.

In the United States, distillate fuel supplied to market was down nearly 25% in the first quarter compared with the five-year average, and 49% below the first quarter 2015 data from the Energy Information Administration shows, due in large part to limited heating demand. Industrial output has been weak too, with the majority of diesel in the US consumed in the industrial and commercial sectors.

Freight tonnage jumped in February from January and from February 2015.

“While it is nice to see a strong February, I caution everyone not to read too much into it,” said Bob Costello, chief economist with the American Trucking Association, the largest US association for the trucking industry. “The strength was mainly due to a weaker than average January, including bad winter storms, thus there was some catch-up going on in February.”

Costello said he remained concerned over “elevated inventories throughout the supply chain. We need those inventories reduced before trucking can count on more consistent, better freight volumes.”

Diesel fuel consumption is also under pressure from reduced rail movements amid a steep decline in coal shipments, and with the dramatic drop in drilling for oil and natural gas. Coal consumption in the US was down 52% in 2015 from 2010 statistics from the EIA show, while oil services provider Baker Hughes, Inc. reports a 77% decline in the US rig count from peak activity in October 2014 to the start of the second quarter.

In contrast, the market for biodiesel has expanded in the US, able to do so in large part through clarity in a federal demand mandate and a tax incentive.

In November 2015, the US Environmental Protection Agency finalized the annual demand mandates under the Renewable Fuel Standard for 2016, with the RFS requiring progressively higher use of renewable fuels through 2022. The renewables are set in five nested categories, with one of those categories biomass-based diesel fuel. Obligated parties under the RFS, which include oil refiners, importers and blenders, must blend a certain amount of renewables within their pool of petroleum products that...