Russian decision to ban diesel exports puts pressure on Petrobras, analysts say

Russia’s decision on Thursday to temporarily ban diesel exports due to a domestic shortage is expected to impact the Brazilian market and put pressure on Petrobras to renovate the refinery, experts told Reuters.

If Russian products were also in short supply in Brazil, the need for imports from other sources would increase. But such external purchases by importers require higher prices from Petrobras, as the state firm’s diesel currently lags behind the global market, according to analysts.

This year, Russia became the main foreign supplier of diesel to the Brazilian market, taking over from the Americans by offering the fuel at a discount compared to other sources, and facing sanctions from G7 countries on derivatives produced in country due to the Ukrainian war.

In August alone, Russian diesel was responsible for more than 70% of the volume imported by Brazil, which imports between 25% and 30% of its needs for this fuel.

“From the moment that the large source of supply ends up being forcibly reduced, the tendency is for the market to react in a sign of restriction,” said the managing partner of Raion Consultoria, Eduardo Oliveira de Melo.

The expert also pointed out that US diesel, which has traditionally been Brazil’s largest external supplier, is currently priced 50 cents per liter higher than the average charged by Petrobras, Brazil’s main supplier, in sales to distributors.

“The market is already reacting, the price of diesel is increasing… it is expected that tomorrow (Friday) will have an impact on the PPI (Import Parity Price) of around 5%,” said the president of the Brazilian Association of Fuel importers (Abicom), Sergio Araújo.

With less supply of Russian diesel, the imported product is expected to become more expensive in Brazil.

This in a context in which the price gap of imported diesel compared to that of Petrobras is 14%, according to Abicom accounts.

“This undoubtedly puts pressure on Petrobras too, but let’s wait, see how it goes,” Araujo added, recalling that importers find it difficult to make foreign purchases with such a price gap, while Brazil depends on imported fuel to satisfy much of of Your needs.

The director of the Brazilian Center for Infrastructure (CBIE), Pedro Rodrigues, agrees.

“The restriction announced by Russia, without a doubt, affects Brazil… With the restriction, the outlet will be the international market, so the gap should increase and imports decrease, putting pressure on Petrobras,” Rodrigues said.

But Russia did not provide details on that restriction. Experts underline that we will have to wait for the next few days to have greater clarity on the developments.

Russia has already reduced its maritime exports of diesel and gas oil by nearly 30%, to around 1.7 million tonnes, in the first 20 days of September compared to the same period in August, as local refineries went into seasonal maintenance and the domestic market faced fuel shortages and rising prices, traders and LSEG data said.

“The situation, if confirmed and maintained, indicates a scenario of complexity and volatility for the Brazilian diesel market. Russia has become the main supplier of diesel to Brazil… this will have significant implications for the country, given its dependence on 30 % countries of Brazil in relation to external sourcing of the product,” said former ANP director Aurélio Amaral.

For the former president of Petrobras, José Mauro Coelho, the Russian measure “could have a very negative impact”, since Petrobras would have to import more diesel if the current pricing policy were maintained.

“In other words, this policy of not following PPI distorts the market and can lead to major supply challenges,” Coelho said.

With the new management, Petrobras abandoned the so-called PPI policy and announced a new strategy that promises to practice more favorable values ​​for itself and its customers, avoiding external volatility for consumers, without moving away from the global reference market.

Contacted, Petrobras did not immediately comment on the matter.

Oil prices rose on Thursday as the market considered the impact of the Russian decision. Around 2pm (Brasilia time), a barrel of Brent rose 0.15% to $93.67.

Source: Terra

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