Petrobras raises wholesale fuel prices, ending pause

Brazil's state-controlled Petrobras increased wholesale fuel prices, ending a pause after 14 September attacks in Saudi Arabia drove up the international oil price.

The increases of 3.5pc for gasoline and 4.2pc for diesel take effect today.

On 16 September, Petrobras said it would wait for the market to stabilize before adjusting its refinery gate prices, a decision that raised doubts over the firm's commitment to a market-based pricing policy adopted in October 2016.

Competing importers downplayed the risk that Petrobras intended to permanently deviate from import price parity. "Considering an event of this size, prices usually peak until stabilization occurs. In this scenario, it is natural that Petrobras has decided to wait for the consolidation of a new price level. After price stabilization, Petrobras should once again follow international parity," fuel importing consortium Abicom told Argus.

Abicom represents nine firms accounting for around 56pc of the fuel imported into Brazil.

Today's gasoline price increase, the first since 5 September, pushes average refinery gate prices for gasoline without additives to around R1.75/l ($0.43/l). Refinery gate diesel prices, last increased on 13 September, now average around R2.4/l.

Petrobras uses US dollar-denominated futures contracts to hedge fuel price changes.

Autonomous decision-making that is free of interference from the federal government, Petrobras' controlling shareholder, is seen as key to the company's plan to attract investors to Brazil's refining sector. The company is selling around half of its 2.2mn b/d of installed refining capacity.

Petrobras' 2019-23 business plan assumes an average Brent price of $66/bl for this year.