With the peak of oil prices in recent days, the gap between prices practiced by Petrobras and the international parity has widened and reached R$1 in the case of a liter of diesel, according to market estimates. The state-owned company has not changed fuel prices at refineries for 49 days and a new adjustment is just a matter of time, as the worsening war in Ukraine puts pressure on the price of the commodity, analysts say.
On Wednesday, the Brent barrel, a global benchmark, closed the day up 7.58%, at $112.93 – the highest since 2014. In addition to the escalation of the war in Ukraine and more difficulties for trading companies to buy Russian oil, factors such as the reduction in U.S. inventories and the decision by the Organization of Petroleum Exporting Countries (OPEC) to maintain April’s production growth target of 400,000 barrels a day, even in the face of tight supply, contributed to the rise of the commodity prices.
According to consultancy Stonex, Petrobras is selling a liter of S-10 diesel with a 30% difference, or R$1.10 a liter, in relation to the import parity price (IPP), while for gasoline the difference is 25%, the equivalent of R$0.80 a liter. The Brazilian Fuel Importers Association (Abicom) complains that Petrobras is systematically holding adjustments and that the windows of opportunity for private-sector trading companies are closed in the country. The entity estimates that the oil company’s lag in relation to international parity reached 25% on Wednesday – the equivalent of R$1.22 for diesel and R$1.10 for gasoline.
In the assessment of Stonex’s risk management consultant, Pedro Shinzato, this is “a very intense stress test” for the state-owned fuel policy. He points out that the company has been practicing prices below parity since January and that the difference at the moment is so high that it makes it difficult to fully align with international prices.
Mr. Shinzato believes that the oil company will, in view of this, make a partial adjustment, without passing on the entire increase seen in the last weeks. He cites, however, that the company’s lag already creates distortions in the market. Since the end of last year, Petrobras has been competing, especially in the Northeast region, with Mubadala’s Acelen, a company that owns the Mataripe refinery, in Bahia.
In a report, Goldman Sachs highlighted that the lag of Petrobras’s prices in relation to the international market is above the levels of 2021, when the state-owned company practiced, on average, prices 9% below the import parity price in the case of diesel and 15% below parity on gasoline. Goldman Sachs points out, however, that the company’s exploration and production gains with the appreciation of oil offset the lower margins in refining, if gasoline and diesel prices remain at current levels.
Faced with the peak in oil prices, the president of the Senate, Rodrigo Pacheco (Social Democratic Party – PSD/Minas Gerais), signaled the resumption next week of the discussions on two bills proposing solutions to cushion fuel prices in the country. Mr. Pacheco said that “more than ever” it is necessary to “prevent” the inflation of oil products at gas stations.
In Brazil, the average price of gasoline comes from five consecutive weeks of decline at the pumps, according to data from the National Petroleum Agency (ANP), but any adjustment by Petrobras tends to reverse the curve. The fuel was traded, on average, at R$6.56 a liter at gas stations last week, a level 1.5% below that seen in the week between January 16 and 22, when the average price at the pumps rose for the last time. Diesel, on the other hand, has remained more stable in recent weeks.
Last week, in the midst of the beginning of the invasion of Ukraine by Russia, Petrobras signaled that it would not respond immediately to the intensification of the oil price and that it would watch a little more the behavior of the commodity before deciding on possible adjustments. Claudio Mastella, the company’s commercialization and logistics head, said on February 24, before the barrel hit $100, that the stronger real helped to offset part of the increase in oil and allowed the company to keep prices unchanged since January. He also reinforced that the company avoids passing on cyclical volatilities to consumers.
Petrobras has been pressured by President Jair Bolsonaro in relation to fuel prices. Last week, he said that Petrobras CEO Joaquim Silva e Luna makes “more than R$ 200,000 per month” and that the head of the state company “has to present the solution and show what is happening.”
For Ativa Investimentos, the current rate of increase in OPEC’s supply will keep oil prices high and raises expectations for the next meeting of the bloc, at the end of March. The broker believes that, with the escalation of the conflict in Eastern Europe, Saudi Arabia and allies will have difficulties in dealing with the conflicting interests between the U.S. – which calls for a faster growth of supply – and Russia, an ally of the bloc and against to a rapid increase in production.
Atlas One manager Subhojit Daripa, meanwhile, believes that current price levels may not last. “With a barrel at $120, we may have a situation that leads to the destruction of demand. This could cause the price to fall precipitously.”
Source: Valor International