Petrobras Punished for Caving on Fuel Prices as Shares Sink

(Bloomberg) -- Petrobras fell the most in a year after it backtracked on a market-based fuel pricing policy amid a nationwide truckers strike that has wrought havoc on Latin America’s largest economy.

Petroleo Brasileiro SA, as the Rio de Janeiro-based company is formally known, fell as much as 15 percent to the lowest in three months. It was the biggest drop since May 18, 2017.

Bank of America Merrill Lynch, Morgan Stanley and Credit Suisse Group AG all cut their recommendations after Chief Executive Officer Pedro Parente announced a 10 percent cut in wholesale diesel prices late Wednesday to help the government negotiate an end to the strike. Truckers continued the stoppage on Thursday to demand additional concessions from the company and the government.

“The just announced diesel price reduction in response to truckers’ protest is likely to materially damage Petrobras’ perceived independence in a way that may be difficult to recover,” Frank McGann, an analyst at Merrill Lynch, wrote in a report where he cut his recommendation on the company’s American depositary receipts to neutral and his price objective to $17. “We think that the investment case for Petrobras has been seriously damaged, and the risk profile has risen.”

Parente told reporters on Wednesday in Rio that the company isn’t bowing to pressure and that the temporary measure doesn’t mean a change in its pricing policy.

©2018 Bloomberg L.P.