New Petrobras CEO in Hot Seat on Fuel Prices With Oil Climbing

Surging oil futures are set to test a promise by Petrobras’ new chief to keep diesel prices at parity with the international market.

Joaquim Silva e Luna, a former army general with no experience in oil, has said he’ll keep retail prices competitive after Latin America’s largest crude producer lost an estimated $40 billion selling fuel below international levels during the most recent commodities supercycle. But if oil keeps climbing, he’s likely to come under pressure from politically influential truck drivers -- a critical base of support for President Jair Bolsonaro -- to start subsidizing diesel once again.

Uncertainty around that issue remains a key concern for investors, Bloomberg Intelligence Senior Credit Analyst Jaimin Patel said in a report Wednesday.

New Petrobras CEO in Hot Seat on Fuel Prices With Oil Climbing

What Bloomberg Intelligence Says

Petrobras’ decision to pay a $1.8 billion dividend in April, before it had reduced debt below $60 billion, doesn’t concern us as much as the uncertainty surrounding the company’s planned asset sales and Brazil’s retail-fuel-pricing policy. Notwithstanding the dividend payout, we expect management to focus on capital discipline, with debt reduction a high priority.

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