Brazil distributors scramble for diesel amid Petrobras shakeup

Brazilian fuel distributors are scrambling to secure diesel supplies for March and April after state-run oil company Petrobras said it would not fully meet their demand, adding to uncertainty amid a sudden management shakeup.

National oil industry regulator ANP confirmed to Reuters that distributors are searching for alternative diesel supplies after Petrobras turned down their orders, but the agency played down concerns of diesel shortages during a bumper soy harvest.

Fuel importers association Abicom said domestic prices set by the state firm have lagged a rebound in global markets so much that importing is unprofitable.

Outgoing Petrobras Chief Executive Roberto Castello Branco has resisted importing fuel to sell at a loss, as the state firm formally known as Petroleo Brasileiro SA did in past decades. But his efforts to raise prices at the pump this month drew the ire of President Jair Bolsonaro, who named his replacement on Friday.

The transition adds to uncertainty for distributors and importers now speculating about a new Petrobras pricing policy.

“Either there’s going to be a shortage of product or Petrobras will need to get heavily involved to supply the market and suffer the losses,” said Thadeu Silva, head of oil and gas at consultancy INTL FCStone.

Petrobras declined to say if it would meet distributors’ demand for fuel in coming months. The company said it had informed customers about its diesel supplies for March, respecting the volumes and periods stipulated in contracts.

After Petrobras lost tens of billions of dollars over the past decade selling imported fuel at a loss, its bylaws were amended in 2017 to require that the government compensate it for such operations – a rule that has not yet been put to the test.

“Today we see no risk of shortage (in March and April),” said ANP Director Rodolfo Saboia, adding that the agency will be monitoring the situation.