State-owned company cuts refinery price by R$ 0.16 per liter in light of falling global oil costs.
Following the surprise announcement by OPEC+ at the weekend that it would increase oil production from June, the Brazilian state oil company Petrobras $PETR3 (+0.79%)
$PETR4 (-0.41%) acted quickly and lowered domestic diesel prices. On Monday (5th), the company announced a 4.66% cut in the price of diesel, reducing the price per liter by R$0.16 from R$3.43 to R$3.27. The cartel's move put downward pressure on global oil prices and gave Petrobras room to adjust domestic prices.
This is the third reduction in the price of diesel by Petrobras since the beginning of April, bringing the cumulative reduction to 12.6%. The first adjustment took place on April 1 with a decrease of 4.57%, followed by a reduction of 3.38% on April 17. Petrol prices, on the other hand, have remained unchanged since July 2024. The new diesel price comes into force on Tuesday (6th).
Despite the recent price cuts, market research companies estimate that Petrobras' diesel price is still above international parity prices. According to StoneX, the price of Petrobras diesel is currently R$0.34 per liter above the world market price, i.e. 10.5% above parity. There is a similar discrepancy of R$ 0.30 per liter for gasoline.
The Brazilian Association of Fuel Importers (Abicom) estimates the Petrobras diesel price at 5% above parity, or R$ 0.17 per liter, and the gasoline price at 8% above parity (R$ 0.24). The Brazilian Center for Infrastructure Studies (CBIE) estimates the premium for diesel at 3.7 % (R$ 0.12 per liter), while gasoline is trading 2.1 % below the international level.
Brent crude for July delivery closed at $60.23 on Monday, down 1.72%, while August contracts fell 1.04% to $59.89. Market forecasts for Brent are averaging between $65 and $70 per barrel this year. Given the less optimistic outlook, Petrobras ordinary shares fell 2.81% to R$31.77 on the B3 exchange. The preference shares ended the trading session down 3.73% at R$ 29.66, their lowest closing price since 2025.
"Taking into account the mandatory blend of 86% regular diesel (Diesel A) and 14% biodiesel for the production of retail diesel (Diesel B), Petrobras' share of the consumer price at the pump will now be R$2.81 per liter, a reduction of R$0.14 per liter," the company said in a statement.
Petrobras' move comes in the wake of OPEC+'s decision, announced on Saturday (3), to increase production by 411,000 barrels per day from next month. Although anticipated for some time, the increase was implemented earlier than expected. The cartel is due to meet again on June 1, when members are expected to set production targets for July.
In a report, Goldman Sachs assumes that OPEC+ will decide on a further production increase at this meeting. The bank cited better-than-expected economic data suggesting that a potential drop in demand may not be significant enough to justify a supply cut by the cartel.
Goldman Sachs also noted that Petrobras' latest move is another step towards aligning domestic fuel prices with international benchmarks. However, with prices still above parity, the bank sees scope for further downward adjustments.
According to circles close to Petrobras, the price reductions for diesel fuel have not been fully felt by consumers at the pump. In April, the company's two price cuts totaled R$0.29 per liter, but data from the National Petroleum Agency (ANP) shows that average pump prices fell by only R$0.13. With Monday's cut, wholesale diesel prices have fallen by R$0.45 per liter since April, which analysts estimate could mean a drop of R$0.39 per liter for consumers.
The Fecombustíveis association, which represents fuel distributors, emphasized that pricing is deregulated throughout the supply chain in Brazil. The association explained that neither it nor its 34 affiliated unions conduct price surveys or monitor the market: "Distributors are completely dependent on the pricing decisions of upstream companies and must also evaluate their own administrative costs according to their business structure."
Earlier this month, Petrobras increased kerosene prices for traders by 0.31%. The company usually adjusts kerosene prices on the first day of each month in accordance with contractual provisions.