Bolsonaro fires Petrobras CEO who warned of diesel crisis

Bolsonaro also called for the election of a new board, according to a statement issued around midnight local time by the state-controlled company on Monday, paving the way for a complete overhaul of the executive leadership.

José Mauro Ferreira Coelho is the third Petrobras CEO fired by Bolsonaro over fuel prices. The president, who is seeking re-election in October but trailing in the polls, said Petrobras should use its profits to lower fuel prices and help control inflation.

Bolsonaro, who also sacked an energy minister earlier this year, has appointed Caio Mario Paes de Andrade to replace Coelho.

The government controls Petroleo Brasileiro, as the company is officially known, with a majority of voting shares, although private investors own more than 60% of the company.

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Brazil is entering a crucial window to secure diesel supplies and Petrobras management alerted the government last week that pumps could run dry during the key soybean harvest season if the company fails to sell diesel. fuel at market prices, according to four people familiar with the discussions and an internal presentation seen by Reuters.

Petrobras said the company and other importers would struggle to get diesel amid the worst fuel shortage in 14 years, the sources said.

Analysts, private importers and officials from oil regulator ANP echoed those concerns, said people close to the talks, who requested anonymity to discuss the politically sensitive issue.

Petrobras’ presentation signaled the risk of shortages in the third quarter, as diesel demand increases seasonally in Brazil as well as the United States. The South American country begins shipping the world’s largest soybean crop in August.

“If there is no market price signal ahead, there is a significant risk of diesel shortages during peak demand during the harvest season, affecting Brazil’s GDP,” Petrobras said. in the presentation entitled “Fuels: challenges and solutions” and dated May. 2022.

Petrobras did not respond to a request for comment.

Diesel supply has become a global concern since sanctions against Russia reshaped the fuel trade and caused international stocks to fall to historic lows. Importing countries are measuring the risk of rising costs and supply shortages as industry closes refineries for repairs or to reduce carbon emissions.

Concerns in Brazil over diesel imports in the second half of the year grew after U.S. Gulf refiners, its main suppliers, began redirecting shipments to Europe, two of the sources said.

“Global diesel stocks are well below the historical average,” Petrobras said in the presentation shared with the Ministry of Mines and Energy. “Petrobras alone cannot solve the global rise in energy prices.”

Energy Minister Adolfo Sachsida called oil analysts on Friday to ask about second-half diesel shortages, a person directly involved in the matter said. The ministry did not respond to a request for comment.

“If Petrobras stops selling diesel at international prices for more than two or three weeks, there is a risk that the pumps will dry up,” said a senior executive at a major diesel producer.

Propose grants

Executives from Petrobras, whose bylaws prohibit selling fuel at a loss without compensation, suggested in the presentation that Brazil could reduce taxes or subsidize fuel to consumers, citing the example of several European Union countries.

Fuel subsidies cost Brazil around 7.5 billion reais ($1.6 billion) in 2018, when former president Michel Temer implemented them for a few months to end a nationwide protest by truckers .

The cost of a similar measure this year could exceed 60 billion reais, one of the people familiar with the talks estimated.

Russia’s invasion of Ukraine sent crude oil prices to a 14-year high. This month, global shortages led diesel traders to pay a premium of more than $50 a barrel.

At most, Brazilian diesel stocks can cover around one month of national demand. At Petrobras, supplies are at about half capacity, according to two sources.

Brazil reserves shipments in June for the August-October soybean harvest, when most grain arrives at the port via long trucking routes.

The company has started looking to suppliers further afield in West Africa and India, one of the sources said. But while a cargo of diesel from the Gulf takes two to three weeks to arrive in Brazil, a ship from India can take 45 to 60 days.

“If refineries in the United States are damaged during hurricane season, or if anything else helps to tighten the market, we could be in real trouble,” a Petrobras executive said on condition of anonymity. .

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