Brazil to import less fuel as Petrobras grabs market share

Bloomberg

Brazil fuel imports are set to fall from a record as the country’s state-owned oil company lowers prices in a bid to regain market share. Petroleo Brasileiro SA, which owns 13 out of the 16 refineries in the country, cut diesel prices by 47 percent and gasoline by 38 percent at the refinery gate since January. As a result diesel imported from the US and gasoline from Europe arrives at higher prices than the locally-produced fuels.
Diesel imports have slowed to a trickle, because most would arrive at a loss of as much as $20 per cubic meter (approximately $3 per barrel), compared with profits as high as $600 per cubic meter in 2016, according to people with knowledge of the situation. Brazil’s imports of gasoline and diesel rose to a record last year as Petrobras refineries processed the least crude in 13 years, according to Bloomberg calculations with the country’s oil regulator data. “US refiners may see demand from Brazil coming off this year,” Mark Broadbent, an analyst at Wood Mackenzie, said in an interview in New Orleans. “Petrobras is reducing prices, which means they will run the refineries at higher rates to try to satisfy the domestic demand.”
From 2011 until 2014, state-controlled Petrobras subsidized domestic fuel prices to help the government to keep inflation at bay. The producer started notifying clients in early 2016 that they would need to source some of their fuels elsewhere. After reporting losses from mismanagement and because of a corruption scandal known as Carwash that started in 2014, the company in 2017 stepped up its policy to align domestic prices with those of the international market. Partly, the policy was to discourage competition, but at first this didn’t work.