FuelEU surplus sellers in a buyer’s market: sell or bank?

FuelEU surplus sellers are facing a very different market from the one they experienced during the first compliance cycle. BetterSea’s transaction data shows how substantial the repricing has been. The volume-weighted monthly average fell to €95.17/tCO₂e in September 2026, while the volume-weighted end-of-month price reached €86.45/tCO₂e. This compares with market levels around €180–200/tCO₂e during parts of the first compliance cycle. Importantly, the decline has continued even as trading activity increased after the summer, indicating that the market is not simply suffering from a temporary lack of liquidity. It has moved into a different supply-and-demand environment.

For surplus buyers, that environment is relatively comfortable. More supply is available, sellers are competing for transactions and there is still time before final compliance decisions need to be completed. For surplus generators, the situation is more complicated. Some created their surplus at costs significantly above today's executable market price. Others are generating at much lower costs because current fuel economics have changed. Some need cash and would prefer to sell. Others can afford to wait and are considering banking instead. The result is a market in which many sellers are asking the same question: what should I actually do with my surplus?

There is no single answer. Selling now, banking it for future compliance, and/or using it internally can all be rational decisions. What matters is understanding which risk is being accepted with each choice.

The biggest mistake sellers can make in a weak market is to confuse the need to do something with the need to do something immediately. The second is to solve a temporary liquidity or distribution problem by permanently giving away control over the surplus.

Why the market has become difficult for FuelEU surplus sellers

The current oversupply is closely linked to the economics of generating new FuelEU surplus. The disruption around the Strait of Hormuz has kept conventional bunker prices elevated. At the same time, biofuel prices have not increased proportionally, compressing the cost difference between fossil and renewable fuels. In some cases, particularly where biofuel replaces expensive MGO, the economics can become favourable even before assigning any value to the FuelEU surplus created.

This matters because the surplus market does not care how much a particular seller spent to create its compliance balance. A tonne of positive FuelEU compliance generated through an expensive alternative-fuel strategy provides the buyer with essentially the same compliance function as a tonne generated at very low marginal cost through favourable biofuel economics or an existing LNG fleet.

BetterSea's September market commentary consequently identified a continued low implied mitigation-cost environment as one of the principal reasons for the lower price regime. This creates a particularly uncomfortable situation for generators with a high historical cost basis. A seller may have produced surplus expecting €180 or €200/tCO₂e and now find that buyers are bidding materially below €100.

Commercially, that seller has three separate problems. It has a market-price problem because the surplus is worth less than expected, a timing problem because it must decide whether the current price is temporary or structural, and potentially a liquidity problem because the underlying fuel premium may already have been paid.

Generation cost matters before the surplus is created. Afterwards, the market decides the price.

Generation cost is extremely important when deciding whether to consume a fuel and intentionally create surplus. If generating one tonne of positive compliance costs €150 and the expected market price is €90, deliberately producing that surplus purely for resale would make little sense.

Once the fuel has already been consumed, however, the analysis changes. Much of the expenditure is now sunk. The seller already owns the compliance balance, and its decision is no longer whether to generate it. The decision is whether today's sale value is more attractive than the alternatives available from this point forward. Ultimately, buyers have no reason to reimburse one generator's historical fuel premium when equivalent compliance can be sourced elsewhere for €90.

This is increasingly important because the marginal generator has changed. Companies that previously would have bought surplus may now find that the combination of physical bunker economics, EU ETS savings and FuelEU value makes their own biofuel consumption economical. When those companies become generators themselves, additional low-cost supply enters the market and places additional pressure on everyone else's surplus valuation.

That is a key but uncomfortable feature of a compliance market: the cheapest source of compliance influences the achievable price level.

Sellers still have several choices

Selling at the current market price is the most obvious option. This crystallises the current value, creates immediate cash flow and removes future price risk. For a company that needs working capital or has no meaningful future use for the surplus, this may be entirely rational even where the achieved price is below the original generation cost as the alternative may be to hold surplus whose future value remains uncertain.

The second option is banking. This option is particularly relevant for owners that expect their vessels to develop deficits as FuelEU becomes more stringent. The current 2% GHG-intensity reduction increases considerably every five years. A company with long-term control over the vessel may therefore see greater strategic value in preserving cheap early-year surplus than in selling it into a weak current market. Internal pooling further presents the option to distribute generated surplus to non-compliant vessels for years to come. From a purely financial perspective, this option would need to be compared to buying (more) surplus in a weak market.

Lastly, a seller can monetize part of its surplus to create cash flow while retaining the remainder. It can sell into different periods rather than committing the entire volume at one price. It can preserve sufficient compliance for expected internal exposure while offering only the genuinely excess position to the market. In a volatile and relatively young market, a staged approach can be more rational than trying to make one perfect call on the future price.

Banking preserves optionality, but it does not guarantee a higher price

Banking has become increasingly attractive psychologically as market prices have fallen. If a seller believed its surplus was worth €180 six months ago and can now execute only around €90, carrying the position forward naturally feels preferable to realising the difference. But banking should be assessed as an investment decision rather than avoiding a disappointing market outcome.

There are good reasons to expect future compliance demand to increase. FuelEU's GHG-intensity requirements become progressively more stringent. Companies that remain predominantly fossil-fuelled will require more compliance over time. Today's inexpensive surplus could therefore have significantly greater value later.

There are equally good reasons for caution. The market may continue generating surplus at low cost. LNG fleets can contribute positive compliance under the current target depending on their technical configuration and methane slip. Current biofuel economics may persist. Companies that are banking today may later decide to release those balances, adding supply precisely when sellers expect tightening targets to support prices. BetterSea's September market commentary highlighted exactly this possibility: if low-cost generation persists while surplus continues to accumulate through banking, the market could experience a more persistent imbalance rather than a simple temporary oversupply. This may cause that stricter future targets do not translate into a higher surplus price. As already today, the future price will depend on the relationship between deficits that need to be covered and all the available sources of positive compliance, including balances generated and banked in previous years.

A seller banking at €90 is therefore implicitly taking a view that the expected future value of the surplus, adjusted for risk and liquidity needs, inflation, etc, exceeds the value available today. While this may prove correct, it is worthwhile mentioning that this is a market position rather than certainty.

The regulatory landscape adds another layer of uncertainty

Sellers considering multi-year strategies also need to take regulatory developments into account. The final shape of the IMO Net-Zero Framework remains unresolved. The adjourned extraordinary MEPC session is scheduled to resume on 4 December. Several proposals under discussion retain the idea of a global GHG Fuel Intensity standard combined with transferable surplus units and remedial compliance mechanisms. Brazil's recent proposal, for example, would preserve surplus trading but limit the validity of IMO Surplus Units rather than allowing indefinite banking.

For a FuelEU seller, however, the important point is that a banked FuelEU surplus is (at least at the moment) not the same as an IMO compliance unit. The two systems are separate and it is not clear if FuelEU Maritime will remain when the IMO NZF is passed, and if and to which extent IMO and EU would allow a transfer of FuelEU surplus units between the two systems.

Even if the IMO NZF is not passed during the upcoming session(s), the planned 2027 review of FuelEU Maritime poses another regulatory uncertainty. It may be argued that indefinite banking should be time-limited to prevent further downward pressure on surplus prices and achieve the uptake of alternative fuels intended by the regulation.

Therefore, regulatory uncertainty is another reason why flexibility has value. A company considering whether to sell or bank FuelEU surplus today may reasonably take a multi-year view. It should, however, be cautious about signing away the ability to change that view for several years as a regulatory change can easily and substantially change the price environment.

This is where a buyer's market becomes dangerous for sellers

Weak markets naturally attract intermediaries. That is not inherently problematic. Brokers and traders connect fragmented counterparties and help sellers locate buyers. But the negotiating balance changes when one side becomes significantly more desperate than the other. Today, some surplus generators need liquidity. Others are concerned that volumes will remain unsold. Sellers who entered the year expecting materially higher prices may feel pressure to find someone who can “take the problem away.” That creates an opportunity for commercial structures that would receive much more scrutiny in a stronger seller market.

One arrangement currently appearing in the market illustrates the issue particularly well. Imagine a seller with a substantial FuelEU surplus position. An intermediary offers to market the volume and asks the seller to grant it exclusive rights to the position for an extended period, potentially covering multiple years. A minimum acceptable sale price is agreed. The seller pays a management fee upfront and then pays an additional percentage commission on any volume successfully sold. The proposition sounds attractive because the seller has found someone willing to dedicate resources to selling an increasingly difficult position, but who is taking the risk?

Under such a structure, the seller has already spent the money required to generate the surplus. It then pays another fee to obtain distribution. It gives the intermediary exclusive control over the position and may lose the ability to use competing brokers, sell directly, adjust its strategy or respond independently to changing market conditions. Yet the intermediary has no obligation to buy a single tonne.

If the market falls further and nobody is willing to pay the agreed minimum price, the volume remains with the seller. The seller has suffered the price decline and has already paid the management fee. The intermediary has not had to purchase the surplus or compensate the seller for the failure to execute. The downside therefore remains predominantly with the generator.

The opposite scenario is equally important. Assume current market pressure disappears, fossil fuel prices normalise relative to biofuels, surplus generation becomes materially more expensive and buyer demand starts to tighten. A position marketed exclusively at parameters agreed during today's weak market could suddenly become much more valuable. However, the intermediary has broad authority to transact above an old minimum price and controls the only route through which the seller can reach the market, the seller may have surrendered valuable optionality. The longer the exclusivity lasts, the larger this problem becomes.

Sellers should be sceptical where an intermediary wants compensation upfront, exclusivity over the position and a further commission if the trade succeeds while remaining economically insulated if it does not.

Further, the exclusivity may result in sellers no longer being able to compete independently for the same demand. This is particularly paradoxical in the current market. Sellers are already struggling because supply exceeds demand. If multiple sellers respond by transferring exclusive control of their surplus to the same intermediary, they may collectively strengthen the intermediary's position while weakening their own.

What should sellers actually optimise for?

Ultimately, the objective for a surplus seller in today's market should not simply be to achieve the highest price. It should be to maximise the value of the position while preserving sufficient flexibility to respond to a market that remains highly uncertain. That requires looking at several factors together:

• Current executable market price: not an offer, indicative level or historical expectation, but the price at which transactions are actually clearing. The only surplus price currently representing real executed transactions is BetterSea's FuelEU Surplus Price and Index.

• Generation cost: important for understanding the economics of the original fuel decision and whether further surplus should be intentionally created.

• Liquidity requirements: whether the company needs cash now or has the balance sheet to retain the position.

• Future fleet exposure: whether banked surplus is likely to have greater internal value against future FuelEU deficits or whether an additional surplus purchase at weak levels makes sense especially if own generation cost is higher than market levels.

• Future supply risk: including LNG-generated surplus, additional biofuel consumption and existing balances that may currently be banked.

• Regulatory uncertainty: particularly the 2027 review of FuelEU Maritime and the still-unresolved IMO Net-Zero Framework as well as the potential interplay between both regulations.

  
  

For many generators, the most rational strategy may ultimately be somewhere between selling everything today and banking everything indefinitely. A company could sell enough surplus to recover part of the underlying fuel expenditure while preserving a strategic reserve. It could divide the position into tranches and target different price levels especially when considering 2025's seasonality. It could retain enough positive compliance to hedge anticipated fleet deficits while monetising only the genuinely excess amount. If prices continue declining, it can accelerate sales. If generation costs rise and the market tightens, it retains volume.

Nobody can reliably know what FuelEU surplus will be worth two years from now. A seller therefore does not need to predict the future perfectly. It needs to ensure that it still has choices when the future arrives. In today's market, sellers should be particularly careful about giving away optionality.