Oil and Gas

UPDATE 1-Petrobras shares plunge as diesel price cut fans meddling fears

* Shares down 13 pct as investors eye gov’t pressure

* CEO denies interference, ex-board member sees ‘disaster’ (Adds quote, details of pricing policy)

RIO DE JANEIRO, May 24 (Reuters) - Investors punished Brazil’s Petroleo Brasileiro on Thursday after the state-controlled oil giant cut diesel prices, fanning fears of government meddling at the company as it reemerges from years of corruption and financial woes.

The 10 percent cut, which will last 15 days, is aimed at calming tensions over surging fuel prices, which stoked a nationwide trucker protest hammering commerce across Latin America’s largest economy.

In announcing the surprise move late on Wednesday, which should cost around 350 million reais, the chief executive of the oil firm known as Petrobras, Pedro Parente, insisted that the company was not responding to government pressure.

But the nearly 13-percent slide in Petrobras shares on Thursday suggests investors fear otherwise, raising the specter of a return to problems of recent years when the government forced the company to sell fuel at a loss to tamp down inflation.

“It’s a disaster,” former Petrobras board member Roberto Branco said of Wednesday’s cut. “It sets a dangerous precedent and favors a return to the politization of fuel pricing.”

Under Parente, Petrobras management has distanced itself from government policymaking, turning the page on a major political bribery scandal and recovered profitability, lifting shares to an eight-year high this month.

The move to adjust gasoline and diesel prices almost daily since July in line with global markets bolstered investor confidence. Meanwhile, Parente has orchestrated an operational turnaround, helping the company to book its biggest quarterly profit in five years in May. (Reporting by Alexandra Alper Editing by Chizu Nomiyama and Alistair Bell)