Brazil's Petrobras raises diesel prices, testing Bolsonaro

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A worker walks inside the Brazil's Petrobras P-66 oil rig in the offshore Santos basin in Rio de Janeiro
A worker walks inside the Brazil's Petrobras P-66 oil rig in the offshore Santos basin in Rio de Janeiro, Brazil September 5, 2018. REUTERS/Pilar Olivares

RIO DE JANEIRO, May 9 (Reuters) - Brazilian state-run oil company Petrobras said on Monday it would raise diesel prices by 8.9%, a move that will test the patience of President Jair Bolsonaro, who exhorted the firm last week not to lift them further.

Petroleo Brasileiro SA (PETR4.SA), as the company is formally known, said itwould raise refinery gate diesel prices to 4.91 reais ($0.96) per liter from 4.51 reaisfrom Tuesday.

It said in a statement that the hike, its first in two months, was necessary to track rising international diesel prices amid tighter global supply.

On Thursday, Bolsonaro had ripped into the firm, saying it was committing a "crime" against Brazil and that another price hike could bankrupt the country and cause a "national convulsion". read more

In the statement, the company said it did not have the refining capacity to supply all of Brazil, meaning the country also depends on private refiners and importers who could stop functioning if Petrobras operates at a discount to international rates. That in turn could provoke supply shortages.

The last several days has been a tough baptism for Petrobras' new Chief Executive José Mauro Coelho, who took charge last month after his predecessor fell out with Bolsonaro amid a spat over fuel pricing.

Coelho has made clear he believes the company must peg domestic fuel prices to international rates.

Brazil-listed preferred shares in Petrobras were off 1.8% in morning trade, in line with the nation's benchmark Bovespa equities index (.BVSP).

According to analysts at Itau BBA, there was a 27% gap between international diesel prices and Petrobras' local prices at the end of last week.

Pedro Rodrigues, head of the Brazilian Infrastructure Center (CBIE), said the price hike was inevitable.

"Regardless of the president's and all consumers' complaints and dissatisfaction, not tracking international price could lead to shortages," he told Reuters.

($1 = 5.14 reais)

Reporting by Gram Slattery in Rio de Janeiro and Gabriel Araujo in Sao Paulo

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Gabriel is a Sao Paulo, Brazil-based reporter covering Latin America's financial and breaking news from the region's largest economy. A graduate of the University of Sao Paulo, joined Reuters while in college as a Commodities & Energy intern and has been with the firm ever since. Previously covered sports - including soccer and Formula One - for Brazilian radios and websites.

Thomson Reuters

Washington-based correspondent covering campaigns and Congress. Previously posted in Rio de Janeiro, Sao Paulo and Santiago, Chile, and has reported extensively throughout Latin America. Co-winner of the 2021 Reuters Journalist of the Year Award in the business coverage category for a series on corruption and fraud in the oil industry. He was born in Massachusetts and graduated from Harvard College.

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