RIO DE JANEIRO, BRAZIL – Petrobras (PETR3;PETR4) is monitoring the tension between Russia and Ukraine, which occurs at a bullish moment for the oil market, also driven by strong global demand and insufficient supply, said the state-owned company’s CEO, reserve General Joaquim Silva e Luna.
The executive further said he believes a war is unlikely, and that a stabilization of tensions has the potential to cool the market, something the company also takes into account before any changes on oil product prices.
In the year, the rise in global benchmark Brent oil exceeds 20%, and the commodity renewed a high since 2014 on Monday, in light of a threat of war between Ukraine and Russia, one of the largest global oil and gas producers.
“We are experiencing a period of low OPEC stocks, excess demand over supply, and a much higher post-pandemic economic recovery than the world expects” Luna said Monday.
“There was also a severe cold spell in the United States which led to a large consumption, all of this leads to low stocks, higher demand and insufficient supply. I don’t think it could (come at a worse time),” the executive added.
Petrobras adopts a price parity policy for oil derivatives in the domestic market, in relation to international values, which also considers factors such as the exchange rate.
High oil prices invariably put pressure on the pricing policy.
However, in recent weeks, the dollar lost strength against the Brazilian real, which to some extent “offset” the pressure from the oil barrel.
While the Brent rose more than 20% in the year, the dollar fell about 6% against the Brazilian real. On Monday, the North American currency closed at its lowest level since September 2021, at R$5.2195.
Part of the rise in the commodity has been passed on in January, when Petrobras increased diesel prices at refineries by 8%, while gasoline sold to distributors rose by an average of 4.85%.
When asked about new adjustments in fuel prices, given the tension between Russia and Ukraine, Luna dismissed the question.
“We are accompanying and monitoring the situation to see if it is a point outside the curve or if it has already turned the curve. We are monitoring the situation around the clock,” he said.
Petrobras’ CEO added that he is rooting against a conflict and stressed that for a war to be averted, concessions will have to be made on both sides.
“I think that a war as such is unlikely, but each side has to give in… If a conflict escalates into a war, no one can control it. This is a war no one wants. But it already exists on a diplomatic level, tensions and many actors working.”
According to Luna, despite other bullish factors in the market, the Brent price will drop as soon as “the conflict stabilizes.”
While there are factors driving up fuel prices for consumers, on the other hand, in the Brazilian Congress there are ongoing debates around bills that could relax taxes levied on the price of oil derivatives, aiming to lower costs.
Last year, Brazil’s official inflation was strongly impacted by fuel readjustments. Gasoline rose almost 48% and ethanol over 62%, according to the IBGE (Brazilian Institute of Geography and Statistics).
Gasoline alone accounted for almost a quarter of 2021 inflation, which reached 10.06%.