RIO DE JANEIRO (Reuters) - Brazilian President Jair Bolsonaro and Petrobras said on Monday the oil firm was not planning to immediately raise fuel prices in response to the attack in Saudi Arabia, showing the state-run firm may be open to overlooking market pricing norms for now.
In an interview with Brazil’s Record TV, Bolsonaro said he was told by Petrobras Chief Executive Roberto Castello Branco that while fuel prices set by the firm tend to follow international prices, the recent rise in oil prices was “atypical”.
“I talked a little bit ago with Petrobras’ CEO, Castello Branco,” Bolsonaro said. “He told me that, as it’s something atypical and that it appears it will end, he’s not planning on adjusting fuel prices.”
Shortly after Bolsonaro’s comments, Petrobras released a statement saying it had decided not to adjust fuel prices for now, but would observe market conditions in the coming days and make a decision on prices at the appropriate time. The company did not immediately respond to a request for comment about the conversation between Bolsonaro and Castello Branco.
In response to a massive truckers’ strike in May 2018, Brazil’s government forced Petrobras to cut fuel prices, leading the firm’s then chief executive, Pedro Parente, to resign in protest. That in turn sparked a major sell-off in the company’s shares.
Investors ever since have been wary of possible political interference at Petroleo Brasileiro SA (PETR4.SA), as the firm is formally known.
Bolsonaro’s government, which took power in January, has pledged a hands-off approach. But Bolsonaro is a relative newcomer to free market economics, and for decades had advocated interventionist policies as a federal congressman.
In April, Petrobras shares fell around 8% after the company cancelled a diesel price hike following a conversation between Bolsonaro and Castello Branco.
In a note to clients earlier on Monday, analysts at UBS led by Luiz Carvalho said the Saturday attack in Saudi Arabia, which interrupted about 5% of the world’s oil supply and sent prices soaring, would be a good test for Petrobras.
“Over the past years, we have seen several examples where the company was not able to follow international prices leading to significant losses in the refining business,” the analysts wrote.
They added that a failure to lower prices could harm the ongoing sale of eight refineries by Petrobras, which is expected to fetch billions of dollars.
Earlier on Monday, Reuters reported that Petrobras was planning on keeping fuel prices steady for the time being, rather than react to short-term volatility.
Brazil-listed preferred shares in the firm closed up 4.4% on Monday, buoyed by spiking crude prices.
Reporting by Gram Slattery and Marta Nogueira; Additional reporting by Rodrigo Viga Gaier; Editing by Shri Navaratnam and Muralikumar Anantharaman