Army general nominated to head Petrobras: Update

Adds Petrobras statement.

Brazil's president Jair Bolsonaro moved to replace Petrobras chief executive Roberto Castello Branco with an army general in a nod to union pressure over diesel prices.

Bolsonaro announced the change on social media following repeated claims throughout the week that he would not intervene in the state-controlled company's decisions while complaining about its recent wholesale fuel price hikes.

"The government decided to designate General Joaquim Silva e Luna to fulfill a new mission as the board member and Petrobras president, after the end of the cycle of Mr. Roberto Castello Branco", according to Brazil's mines and energy ministry.

In a statement tonight, Petrobras said Castello Branco and other executive directors of the company have a mandate until 20 March. The company confirmed that it received a letter from the mines and energy ministry requesting the convening of an extraordinary board meeting "with the objective of promoting the replacement and election of a member of the Board Directors, and nominating Joaquim Silva and Luna, replacing Roberto da Cunha Castello Branco."

Silva e Luna, who is not known to have any oil sector experience, joins other military appointees in Bolsonaro's cabinet.

Petrobras' share price had already come under pressure this week after Bolsonaro ratcheted up criticism of the company's fuel pricing, which is based on market criteria since 2016.

Repeatedly threatening to strike, trucking unions have been lobbying Brasilia to rein in diesel prices, and in response the government has suspended a federal tax on the fuel for two months starting in March. A nationwide truckers' strike in May 2018 crippled food and fuel distribution across Brazil.

The managerial overhaul is sure to rattle investors on the eve of Petrobras' fourth quarter 2020 earnings presentation next week. The company's plans to sell half of its 2.2mn b/d in domestic refining capacity is also at stake as potential buyers look askance at potential market turmoil.

By Gabrielle Moreira and Nathan Walters