The hydrothermal treatment (HTT) technology is evaluated for its potential as a process to convert algae and algal debris into a liquid fuel, within a sustainable algae biorefinery concept in which, next to fuels (gaseous and liquid), high value products are coproduced, nutrients and water are recycled, and the use of fossil energy is minimized. In this work, the freshwater microalgae Desmodesmus sp. was used as feedstock. HTT was investigated over a very wide range of temperatures (175–450 °C) and reaction times (up to 60 min), using a batch reactor system. The different product phases were quantified and analyzed. The maximum oil yield (49 wt %) was obtained at 375 °C and 5 min reaction time, recovering 75% of the algal calorific value into the oil and an energy densification from 22 to 36 MJ/kg. At increasing temperature, both the oil yield and the nitrogen content in the oil increased, necessitating further investigation on the molecular composition of the oil. This was performed in the adjacent collaborative paper with special attention to the nitrogen-containing compounds and to gain insight in the liquefaction mechanism. A pioneering visual inspection of the cells after HTT showed that a large step increase in the HTT oil yield, when going from 225 to 250 °C at 5 min reaction time, coincided with a major cell wall rupture under these conditions. Additionally, it was found that the oil composition, by extractive recovery after HTT below 250 °C, did change with temperature, even though the algal cells were visually still unbroken. Finally, the possibilities of recycling growth nutrients became evident by analyzing the aqueous fractions obtained after HTT. From the results obtained, we concluded that HTT is most suited as post-treatment technology in an algae biorefinery system, after the wet extraction of high value products, such as protein-rich food/feed ingredients and lipids.