London, 5 January (Argus) — The sustainable aviation fuel (SAF) market faces the same supply puzzle in 2026 — the gap between perception and reality.
Analysts broadly agreed the global market was structurally long in 2025, reinforced by shelved projects including a $1bn write-down by Shell. Yet SAF premiums hit two-year highs in mid-November — roughly double first-half levels — before easing in December.
The case for a well-supplied market is compelling. Demand from the EU, the world’s largest SAF consumption centre due to its size and its blending mandate, will be largely unchanged, with the bloc’s quota steady at 2pc in 2026. Global voluntary demand remains fickle and liable to retreat when prices become unfavourable or if climate-sceptic headwinds undermine company commitments.
New SAF plants in Europe, Asia-Pacific and North America will add supply. Chinese exports are likely to rise after Beijing approved more licences in October. And unlike in the second half of 2025, when several SAF producers entered maintenance at the same time, supply disruptions are unlikely to align at the same scale.
But several factors in 2026 could trim the perceived surplus. European hydrotreated vegetable oil (HVO) demand will rise under new legislation in Germany and the Netherlands. This will trim some SAF capacity, as both fuels share production units, balancing the ratio of each according to demand.
The UK’s SAF mandate will nearly double to 3.6pc in 2026, from 2pc in 2025. And London’s Heathrow Airport plans to ramp up its incentive scheme, which should spur extra voluntary buying in the UK. Singapore’s levy-funded SAF procurement scheme could phase in towards the end of 2026, adding some demand from Asia-Pacific.
Administrative hurdles that delayed SAF buying until partway through 2025 — such as certification issues for producers, midstream terminals and blending facilities — have largely been resolved. This should allow obligated parties to spread purchases more evenly across 2026 and reduce the risk of late buying pressure.
Yet trading strategies and behavioural patterns may prove harder to shift. The 12-month obligation cycle reduces urgency for early deals and tempts buyers to wait for cheaper or opportunistic offers later in the year. This dynamic contributed to fourth-quarter price spikes in HVO in 2024 and SAF in 2025, suggesting a seasonal pattern may be emerging. If market participants anticipate an avalanche of supply and cheaper prices later in 2026, they could fall into the same trap as 2025 — creating price volatility even in a well-supplied market.
Participants again predict structural length in the SAF market for 2026, and the perfect storm of 2025 looks unlikely to repeat in full to support prices in the same way. That said, the mandate changes, and the incentive and procurement schemes, could tighten the market. And after forecasts of oversupply flattered to deceive, most obligated parties are likely to tread cautiously in 2026.
