Petrobras says refineries in Brazil are unprepared for November demand

RIO DE JANEIRO, BRAZIL – According to the distributors, state-owned Petrobras is imposing quotas for the supply of gasoline and diesel for next month. The case was brought by distributors to the National Agency of Petroleum, Natural Gas and Biofuels (ANP).

However, the oil company alleges that demand for gasoline and diesel oil exploded in October and November and that its refineries are unprepared to meet this growth.

According to Petrobras, the extra orders requested for November came 20% over its supply capacity for diesel and 10% over for gasoline, an “atypical” demand both in terms of volume and delivery time. “In addition, there was no fact, from the market’s standpoint, that would justify this increase in demand,” the company said.

In practice, Petrobras is letting distributors take on the commitment to import fuel, which it had previously assumed. A part of the internal demand has always been covered with products brought from other countries. With oil and its derivatives on the rise, this cost was being borne by the state-owned company. By transferring the import to distributors, Petrobras eliminates this cost.

“Currently, there are dozens of companies registered with the ANP that are qualified to import fuels. Therefore, this additional demand can be absorbed by the other agents in the Brazilian market,” Petrobras said in a statement.

This change in the company’s stance was celebrated by importers, who see it as an opportunity to gain space in the domestic fuel market. “By reducing imports, Petrobras institutionalizes the free fuel market in Brazil,” said Brazilian Association of Fuel Importers (ABICOM) president Sérgio Araújo.

Generally, the entity criticizes the state-owned company. ABICOM’s struggle has been for Petrobras to raise its prices, in line with the international market, and, by doing so, allow competitors to fight for market share. This time, however, the association applauded the oil company.

Yet the measure does not please a group of distributors. Six of them appealed to the National Agency of Petroleum, Natural Gas, and Biofuels (ANP), complaining of cuts of up to 70% in orders for the supply of petroleum products.

The Association of Fuel Distributors (BRASILCOM) says that members received communications from Petrobras’ commercial sector advising of a series of unilateral cuts in orders made for the supply of gasoline and diesel oil for the month of November.

“The consequence of this supply, however, will be the effect on fuel prices, since foreign products are around 17% more expensive than local products, according to importers,” BRASILCOM said in a statement, reiterating that supply will be guaranteed by imports.

The ANP also ruled out the risk of a shortage. “There is no indication of a shortage in the domestic fuel market at this time. ANP continues to monitor the supply chain and if necessary, will take the appropriate measures to mitigate distortions and reduce risks,” the regulator said.