Petrobras adopts gasoline price hedge

Brazil's state-controlled Petrobras has added a hedge mechanism to its gasoline pricing policy that will allow for 15-day price freezes in the case of unforeseen volatility.

Petrobras says its policy will still be guided by import parity, and daily price variations are possible, but the hedge, which took effect today, gives the company more flexibility.

"There are fuel issues that are structural and there are others, such as hurricanes, that temporarily increase volatility," Petrobras downstream director Jorge Celestino Ramos said today.

Petrobras chief financial officer Rafeal Grisolia says the hedge will use dollar-priced gasoline futures as quoted on US stock exchanges.

The decision comes as Petrobras refinery gate prices for gasoline set new records, reflecting a combination of tighter supply and the weakening Brazilian real.

Petrobras refinery gate gasoline prices have climbed more than 12pc between 1 June and 4 September, and hit a record R2.2069 ($0.53)/l today.

The hedging mechanism was adopted ahead of a busy hurricane season in the US Gulf coast and general elections in Brazil next month. Both could signal more fuel price volatility.

Geopolitical tensions over Iran and rising crude prices contributed to a diesel price spike in May, a trend that fomented a nationwide strike by Brazilian independent truck drivers. The crippling strike led the government to adopt a controversial diesel subsidy.

Grisolia says the company will consider applying a similar hedge to diesel prices after the government-backed R9.5bn subsidy ends on 31 December. Petrobras already uses a quarterly hedge for residential LPG prices.

Celestino Ramos says the hedge is another tool in the Petrobras market-based pricing policy, and should not, over time, have a negative impact on the company's bottom line.

"Petrobras' pricing policy has been evolving since 2016. This market is very sophisticated and we have been studying over the years what tools we could implement to make Petrobras more competitive, profitable, and always the best option for its customers," Celestino told journalists in Rio de Janeiro today.

The change could hit ethanol producers and importers, which have gained market share in recent months as gasoline prices marched upwards.

Gasoline sales averaged around 607,000 b/d in July, a 19pc year-on-year decrease, according to data from oil regulator ANP.