Brazil's Petrobras to Raise Gas and Diesel Prices

RIO DE JANEIRO—Brazilian state-controlled oil company Petró leo Brasileiro SA said Monday it will raise domestic fuel prices after production cuts announced last week by the Organization of the Petroleum Exporting Countries triggered a rally in global oil markets.

Petrobras said it would raise prices at its refineries by 9.5% for diesel fuel and 8.1% for gasoline, starting Tuesday. It cited a spike in oil prices in recent days and a depreciation in Brazil's currency.

The move came as Petrobras' relatively new management team, led by Chief Executive Pedro Parente, seeks to burnish his market-friendly credentials in the eyes of investors. Before his appointment in May, the company was seen as more susceptible to political pressure that, in years past, led it to waste billions of dollars subsidizing fuel prices to help the government meet its inflation target.

Partly due to that mismanagement, Petrobras is now struggling to pay down $123 billion in debt, the largest amount of any company in the oil industry. Turning a profit in its refining business will likely prove crucial toward meeting the ambitious deleveraging targets set by the new CEO.

Under Mr. Parente, Petrobras says it will review fuel prices at least once every 30 days. Monday's hikes will largely reverse the sizable price reductions Petrobras announced on Nov. 8, which raised concern among some investors and may have contributed to a selloff in its shares following the U.S. election.

A number of analysts noted in recent days that OPEC's deal to reduce oil output last week would amount to a key test for Mr. Parente. Following the rise in oil prices and the depreciation in the real over the past month, Brasil Plural estimated Petrobras was selling gasoline and diesel at a 1% and 3% discount to international prices.

Write to Paul Kiernan at [e-mail]

(END) Dow Jones Newswires

December 05, 2016 18:05 ET (23:05 GMT)

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