July 2026 | FuelEU Index & Market Commentary
- Aug 1
- 3 min read
Executive Summary FuelEU Index & Market Commentary | July 2026
July saw FuelEU surplus prices remain at low levels, with a further decline versus June. The non-volume- weighted monthly average declined to 104.83 EUR/t CO₂e, while the volume-weighted monthly average stood slightly higher at 106.52 EUR/t CO₂e. On 31 July, the market closed at 113.98 EUR/t CO₂e on a non- weighted basis and 114.00 EUR/t CO₂e on a volume-weighted basis.
The continued weakness reflects a market still operating under the influence of elevated fossil fuel prices and lower implied biofuel mitigation costs. The anticipated price normalization following June’s temporary decline in VLSFO did not materialize, as geopolitical risk around the Strait of Hormuz intensified again during July, keeping fuel prices above more typical levels. Public market reporting through July pointed to renewed energy-market volatility and elevated shipping risk linked to Hormuz-related disruptions, supporting the broader fuel-cost backdrop that continues to influence FuelEU surplus pricing.
At the same time, July revealed new dynamics between transaction size and price formation. For parts of the month, the volume-weighted index traded above the non-weighted average, indicating a more nuanced supply-side picture than in previous months.
Market Dynamics & Trends
July extended the lower-price environment established after the close of the first compliance cycle. Prices declined further versus June. The non-weighted monthly average decreased by 15% from 123.60 to 104.83 EUR/t CO₂e. Yet, the market appears to have found a lower but relatively stable trading range, with both the non-weighted and volume-weighted indices ending the month close to 114 EUR/t CO₂e.
Fuel economics remained the dominant external driver. Earlier expectations that falling VLSFO prices would support a recovery in surplus values were not realized, as renewed Strait of Hormuz tensions kept fuel markets volatile and fossil fuel prices elevated. This continued to compress the perceived differential between fossil fuels and biofuels, keeping implied mitigation costs low and allowing buyers to maintain pressure on surplus prices.
Demand remained active but price-disciplined. Buyers continue to benefit from the long execution horizon for compliance year 2026, allowing them to avoid urgent procurement and selectively engage at attractive levels. This has kept pressure on sellers, particularly those seeking early-cycle liquidity.
Market Structure
July highlighted a new development in the relationship between headline prices and volume-adjusted pricing. While June’s volume-weighted average remained below the non-weighted average, July showed the reverse, with the volume-weighted monthly average at 106.52 EUR/t CO₂e versus the non-weighted average of 104.83 EUR/t CO₂e.
This points to a more divided supply-side environment. Some sellers appear willing to sell smaller volumes at lower levels in order to maintain market participation and generate liquidity, while larger volumes are not necessarily being discounted to the same extent. An increasing number of sellers are reluctant to release significant volume at the current low-price environment, as doing so would crystallize larger exposure at depressed levels.
As a result, the market is no longer showing a simple relationship where larger volumes automatically clear at a discount. Instead, pricing for size is becoming more dependent on seller strategy, inventory position, and willingness to commit meaningful volume early in the compliance cycle.
Market Context
The anticipated rebound in surplus prices has been delayed. Rather than normalizing upward, the market has maintained low levels across multiple months.
However, the current pricing environment remains heavily influenced by external fuel-market conditions, particularly the elevated fossil fuel backdrop. Should VLSFO prices normalize more sustainably toward historical 2025 levels, the implied cost of biofuel-based mitigation would likely increase again, potentially changing the pricing dynamics for FuelEU surplus.
For now, July confirms that the 2026 market has entered a lower but more technically nuanced pricing regime, where geopolitical events continue to indirectly influence surplus prices.
FuelEU Index & Market Commentary | July 2026 | 01/07/2026
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