Crude Oil Under Pressure as SAF Demand Creates New Waste-Oil Play

Crude oil is holding near recent highs as Middle East tensions keep risk premia elevated, while structural shifts in transport fuels slowly take shape through sustainable aviation fuel (SAF) investments such as Morocco’s planned HEFA-based plant.

Oil benchmarks remain underpinned by geopolitical risks and disrupted trade flows, with Brent trading around recent five‑month highs and WTI near the upper end of its autumn range. At the same time, policy-driven growth in SAF and other low‑carbon fuels is beginning to reshape long‑term demand expectations. A new Moroccan project converting used oils and fats into SAF and renewable diesel highlights how waste streams from the vegetable oil industry are turning into globally traded feedstocks. For crude, this does not yet change near‑term balances, but it reinforces the narrative that future demand growth for jet fuel and road diesel will increasingly be contested by alternative fuels.

Prices

Brent front-month futures have recently traded around the $110–112/bbl area, near the highest levels since May, supported by heightened tensions around Iran and intermittent disruption risks in key shipping lanes.  WTI is hovering just below the psychological $100/bbl mark after a strong run earlier in October, with the front month recently quoted a bit above $98/bbl and up more than 9% on the month.  Volatility has eased slightly in recent sessions but price action remains headline-driven, with any escalation or easing of regional conflict quickly reflected in flat-price moves.

Supply & Demand Shifts from SAF

Morocco plans to build a large SAF production facility in the Bétoya Industrial and Logistics Zone at Nador West Med, with an estimated capital cost of $239 million. Once commissioned, the plant is designed to require about 200 thousand tons of feedstock per year, primarily used cooking oils, animal fats, food processing waste and by-products of vegetable oil refining. Finished output is expected at roughly 176–200 thousand tons of SAF annually, alongside renewable diesel, naphtha and small biopropane volumes.

This configuration directly links oil markets with agricultural and food-processing waste chains. Part of the 200 thousand tons of feedstock will be sourced domestically, but a significant share must be imported, including used vegetable oils and soapstock-derived acid oils moved through Nador West Med port. This creates a new structural outlet for waste lipids that could tighten residue-oil balances in Europe, North Africa and potentially beyond, particularly as competing SAF projects worldwide chase similar feedstocks.

Fundamentals & Policy Backdrop

The Moroccan facility will deploy Axens HEFA technology, the dominant commercial route for producing SAF and renewable diesel from lipid-based feedstocks. Globally, SAF is still a very small share of jet fuel demand (under 1% today), but aggressive policy targets in Europe, the UK and other regions are pushing toward several percent blending by 2030.  IEA scenarios show waste and residue oils as key SAF feedstocks this decade, with limited availability potentially becoming a binding constraint.  In that context, a 176–200 thousand ton per year SAF plant in Morocco, financed with up to $105 million in loans under review by the EBRD plus possible Green Climate Fund support, illustrates how emerging markets are positioning to capture this new value chain.

For crude oil, the immediate volumetric impact is marginal: global jet fuel still accounts for roughly 7% of total oil demand,  and SAF penetration remains low. However, each new commercial-scale HEFA unit marginally erodes the long-run demand profile for conventional jet and road fuels, especially once clustered around major Atlantic Basin hubs. Over time, this may reduce the call on high-sulphur middle distillates while elevating the strategic value of waste oil streams and affecting refinery investment decisions for hydroprocessing capacity.

Trade Flows & Feedstock Markets

The Moroccan project will rely on Nador West Med port for imported used cooking oils and acid oils, integrating SAF production into Mediterranean shipping routes. This will likely deepen trade in waste-based feedstocks between EU producers of vegetable oil by-products and North African processors. Evolving EU SAF mandates and the fact that EU production already exceeds initial 2025 blending targets suggest strong and potentially tightening regional competition for compliant feedstock. 

Because the plant creates a guaranteed outlet for 200 thousand tons per year of low-value residues, it could support higher pricing for waste oils relative to conventional diesel cracks, particularly in tight markets. For crude exporters and refiners, this is another incremental factor pushing the value chain away from simple crude-to-jet and diesel pathways and toward integrated bio-refining and waste-recycling models located close to ports and logistics hubs.

Outlook & Trading Takeaways

Construction and commissioning of the Moroccan SAF facility are expected to take roughly 22 months, with tentative start-up in August 2028, subject to finalization of financing and feedstock supply chains. In the meantime, crude prices are likely to remain primarily driven by geopolitical developments, OPEC+ supply management and macroeconomic sentiment. However, cumulative SAF capacity announcements are gradually influencing longer-term demand expectations for aviation fuels, tempering some structurally bullish crude narratives beyond 2030.

Trading outlook

• Flat-price crude: With Brent near $110–112/bbl and WTI close to $100/bbl, upside appears increasingly event-driven; consider a bias toward selling rallies if Middle East tensions de-escalate or supply disruptions prove short-lived.
• Time spreads: Elevated geopolitical risk argues for maintaining some exposure to backwardation, but moderating demand concerns could limit further steepening; watch inventories and shipping flows closely.
• Refined products: Middle distillate cracks remain supported by geopolitical risk, yet long-run competition from SAF and renewable diesel projects like Morocco’s suggests caution on very long-dated bullish positions.
• Biofeedstocks: The Moroccan plant underlines tightening fundamentals for used cooking oil and residue fats; this supports a constructive medium-term view on waste-oil values relative to fossil diesel benchmarks.

3-day directional view (key benchmarks)

• Brent (front month, ICE): Bias moderately higher but headline-sensitive around $110–112/bbl as markets track developments in the Iran conflict and tanker security.
• WTI (front month, NYMEX): Expected to trade with a slightly firmer bias around the high-$90s, following Brent while also reacting to U.S. inventory data and refinery runs. 
• Jet fuel vs crude: Short term, crack spreads remain supported by air travel demand and risk premia; structurally, increased SAF investment like the Moroccan HEFA plant will slowly cap upside for conventional jet fuel demand growth.