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Energy

Brazil's Petrobras to keep flexible fuel price policy

2 minute read

A logo of Brazil's state-run Petrobras oil company is seen at its headquarters in Rio de Janeiro, Brazil October 16, 2019. REUTERS/Sergio Moraes/File Photo

Petroleo Brasileiro SA (PETR4.SA) will leave its fuel pricing policy unchanged, the company's new trading chief said on Friday, which in practice gives the company significant flexibility to avoid international market volatility when it sets prices.

In 2020, Petrobras, as the Rio de Janeiro-based firm is known, extended from three months to one year the period for which it calculates the international price parity of the fuels it sells.

The decision, made during the term of former Chief Executive Roberto Castello Branco, means that the median domestic fuel price must match up with the median fuel price internationally, plus import costs, over the course of 12 months.

In a news conference following the company's first quarter results release on Friday, trading and logistics chief Claudio Mastella said the policy was meant to protect domestic consumers from price volatility, while at the same time shielding the company from losses.

Mastella said prices would be monitored daily, but there would be no pre-established period for adjustments. Adjustments do not necessarily need to match import prices.

The position marks a middle ground between the daily adjustments favored by the market and the low-frequency ones preferred by consumers.

"We've used various fuel price adjustment frequencies," Mastella told analysts on a teleconference call ahead of the news conference.

"Today, we are at an intermediate level, which seems appropriate to us.... In practice, that means no immediate passing of international volatility onto consumers, while also keeping our prices competitive."

Mastella and others on the state-run oil company's executive board were making their first public appearance since they were appointed in April, after Castello Branco and a raft of other executives officially left the company. Brazilian President Jair Bolsonaro fired Castello Branco in February amid a dispute over fuel prices.

New CEO Joaquim Silva e Luna recorded a message for the teleconference call by video but did not take questions.

The executive board said Petrobras would maintain its oil production and debt reduction targets, and there would be no interruptions to its divestment program.

Petrobras' Brazil-listed preferred shares were up 4.7% in afternoon trade, significantly outperforming Brazil's benchmark Bovespa equities index (.BVSP), which was up 0.9%. Most of those gains occurred at the opening bell.

The company posted a first-quarter profit of $220 million on Thursday night and beat margin estimates.

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