July 15, 2015 / 10:27 PM / 4 years ago

UPDATE 1-Brazil's economy drains gasoline, diesel sales; ethanol rises

* Gasoline falls 5.8 percent, diesel 2.4 percent

* Ethanol surges 41 percent on price parity, taxes

* Full-year 2015 diesel, gasoline sales seen falling (Adds fuel distributors’ comment, outlook for full year gasoline and diesel sales)

By Marta Nogueira and Jeb Blount

RIO DE JANEIRO, July 15 (Reuters) - Brazilian sales of gasoline and diesel fuel fell in the first half of 2015 and are likely to show a full-year decline as Brazil’s economy cools, the country’s fuel distributors’ association SINDICOM told Reuters on Wednesday.

Sales of gasoline-C, the only gasoline blend sold at Brazilian service stations, fell 5.8 percent by volume in the six months ending June 30 compared with the same period a year earlier. Gasoline-C contains 27 percent anhydrous ethanol.

Demand for diesel fell 2.4 percent, and the sale of natural gas for vehicles fell 9.3 percent.

Meanwhile sales of hydrous ethanol, which is sold from its own pumps and competes with gasoline-C, rose 41 percent. SINDICOM members account for about 80 percent of Brazilian retail fuel sales.

The ethanol surge came as the government allowed state-run oil company Petroleo Brasileiro SA, Brazil’s only refiner, to raise the price of gasoline and diesel, closing the gap with international prices. Minas Gerais state, Brazil’s second-most-populous, also adjusted sales taxes to favor ethanol over gasoline-C.

“Diesel sales are closely linked to the economy and when commerce slows you transport less merchandise and then you can clearly see the demand for diesel disappear,” Luciano Libório, SINDICOM’s head of supply and regulation, said.

Brazil’s economy is expected to shrink 2.2 percent in 2015, Banco Itau Unibanco said on Wednesday.

“Gasoline is suffering because its is now near price parity with ethanol,” Libório added.

Because of the difference in energy content between hydrous ethanol and gasoline-C its price per liter must be about 70 percent of the gasoline-C price or less.

Meanwhile, Brazilian exports of gasoline-A, or gasoline without ethanol added, fell and imports rose in the first-half. Brazilian gasoline-A exports fell 14 percent to 104,285 cubic meters (655,933 barrels) in the first six months of 2015 and imports rose 50 percent to 1.97 million cubic meters (12.4 million barrels), according to Brazil’s petroleum regulator ANP.

Libório said that gasoline and diesel demand is likely to fall for the full year too. If full-year diesel falls in 2015 it will be the first decline for Brazil’s most-used vehicle fuel since 2009 when Brazil’s economy was suffering from the impact of the U.S. mortgage and banking crisis.

SINDICOM’s members include Petrobras, as Brazil’s state-run oil company is known, Royal Dutch Shell Plc, Chevron Corp and Brazilian ethanol giant Cosan SA. (Editing by Chris Reese and Cynthia Osterman)

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