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Petrobras scraps fuel import parity policy, shares rise – Reuters

A logo of Brazil's state-run Petrobras oil company is seen at their headquarters in Rio de Janeiro, Brazil October 16, 2019.
A logo of Brazil’s state-run Petrobras oil company is seen at their headquarters in Rio de Janeiro, Brazil October 16, 2019. (Sergio Moraes/Reuters)

Reporting by Marta Nogueira and Rodrigo Viga Gaier, Reuters

EnergiesNet.com 05 16 2023

Brazil’s state-run oil giant, Petrobras (PETR4.SA), has approved a new commercial strategy to set diesel and gasoline prices, it said on Tuesday, ditching its previous import parity policy without revealing a specific fresh pricing formula.

Petrobras shares rose as much as 5% after the announcement, which fulfills one of leftist President Luiz Inacio Lula da Silva’s key election proposals, placing it among the top gainers on Brazil’s main stock index (.BVSP).

The new policy appears to be more friendly to the market in general than investors expected, JPMorgan said in a note to clients. “The end of pricing parity is not good, but this was already expected.”

Petroleo Brasileiro SA said the new strategy would use references such as the cost of main supply alternatives and what it called the “marginal value for Petrobras,” which takes in to account opportunity cost given production, import and export alternatives.

The company previously pegged local fuel prices to international rates such as global oil prices and foreign exchange, but Lula pledged to change that to make fuel cheaper.

Under the new strategy, Petrobras said refinery gate gasoline prices would already be lowered by an average 12.6% starting on Wednesday, while diesel and liquefied petroleum gas (LPG) prices would drop 12.8% and 21.3%, respectively.

Chief Executive Jean Paul Prates said the new policy would preserve Petrobras’ economic results as the company would not go “below profitability,” trying to ease investor concerns over risks to bumper profits.

“The new policy scraps the ‘import parity’ terminology, but in our view it has not changed materially,” Credit Suisse analyst Regis Cardoso said.

The import parity policy was adopted in 2016 by former President Michel Temer. His successor, Jair Bolsonaro, maintained it although he criticized the model when prices rose.

People close to Lula celebrated the announcement, with his Mines and Energy minister, Alexandre Silveira, telling reporters the policy would not impose as much volatility as the import parity used to.

“By no means will Petrobras cease to be attractive to investors,” he added.

Others criticized the move.

“The announcement was very confusing,” said Adriano Pires, who was tapped by Bolsonaro to head Petrobras but never took office. “Transparency in price-setting is over.”

Reporting by Marta Nogueira and Rodrigo Viga Gaier; Editing by Steven Grattan

reuters.com 05 16 2023

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