Petrobras ( PETR4 ) cuts gasoline prices even as oil prices rise in bid to regain lost market

SÃO PAULO (Reuters) – Petrobras ( PETR4 ) announced last night a surprise 4% cut in the price of gasoline sold at refineries starting on Saturday, in a move that appeared to seek to regain market lost to rival hydrogenated ethanol.

“Argus understands that this decision is aimed at expanding the penetration of Petrobras gasoline production in the domestic market, as the company operates at a high utilization rate of its refineries,” said a fuel specialist at the agency specializing in prices and services. , Amance Boutin.

Faced with an international Brent crude oil market firm above $90 a barrel, lower gasoline prices appear to be driven by the current domestic supply and demand situation and competition from ethanol, the analyst added.

“According to Argus’ assessment, based on the current prices on the international market, there would be no possibility to lower prices,” he emphasized.

He recalled that in May, Petrobras defined its new pricing policy, which will take into account alternatives and competition in the domestic market to implement its adjustments.

“Today, the company found itself in a scenario of expanding consumption of hydrated ethanol in Brazil, which causes a decrease in demand for gasoline,” he emphasized.

In September, South Central mills increased sales of hydrogenated ethanol by 18.45% compared to 2022, while sales of anhydrous alcohol (blended with gasoline) fell, indicating continued loss of the fossil fuel market to renewables. registered in August, according to the latest data from regulator ANP.

For StoneX risk management consultant Thiago Vetter, the average decline of 12 cents per liter announced by Petrobras was higher than the lag seen on Thursday of 3 cents, “which meant the price was in line with the international price before the adjustment”.

“So an adjustment to that figure would be inappropriate,” Vetter said.

According to him, “this confirms the view that the company has made an adjustment according to the recent history of the international market (down), but with a greater intensity due to the loss of “market share” in the Otto cycle in relation to hydrated ethanol, which is a product – a substitute for gasoline C at gas stations.”

On the other hand, the day before, Petrobras announced that it will increase the average selling price of diesel fuel to distributors by 6.58% from Saturday.

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In the announcement, the oil company stressed that it aims for competitive pricing by product and location, and that this has led to “separate movements for each product (petrol and diesel)”.

Petrobras was contacted this Friday to comment specifically on the ethanol-related issue that analysts were focusing on.

Ethanol’s higher competitiveness comes after the market overestimated the size of Brazil’s sugarcane crop in recent months, starting to show record volumes of feedstock processing for sugar and ethanol. In addition, the production of fuel from corn must take another step forward.

ANY CONSCIOUSNESS?

Asked whether gasoline would recover the market with this move, an Argus analyst said it would depend on the price behavior of ethanol in the coming weeks, but recalled that biofuel stocks in the South Central are high at more than 10 billion litres. September 15-30, according to the Ministry of Agriculture and Food.

Safras & Mercado ethanol and sugar analyst Mauricio Murucci believes this loss of the gasoline-to-ethanol market could be short-lived as south-central Brazil will soon enter the sugar cane off-season, when biofuel prices tend to rise.

“Petrobras lost market share, but it lost not much… I don’t believe it was a big concern of Petrobras,” he said.

For Murucci, if the price of ethanol rises again in the off-season – starting in December for most plants in the center and south – “theoretically that market will be restored (at the expense of gasoline).”

He said he believes the mills will not cut the price of ethanol to keep up with falling gasoline prices. “They will at least remain stable or avoid further rate hikes.”

Prices for hydrogenated ethanol at Brazilian gas stations fell for a third week in a row, remaining 0.3% lower than the previous period, to an average of 3.735 reais per liter in the country, according to a survey published this Friday by ValeCard, a company specializing in mobile solutions.

“There is no clear trend over the next few weeks as petrol should become more competitive for flexible vehicles following the price cuts announced by Petrobras…” ValeCard head of innovation and portfolio Brendan Rodríguez said.

Last week, ethanol was more competitive in 14 Fed units compared to gasoline, which also fell 0.3% for the week, according to ValeCard.

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