Fuel shortage ruled out in Brazil despite reduced supply

RIO DE JANEIRO, BRAZIL – “There is no indication of a shortage in the national fuel market at this time,” ANP said in a statement released on Tuesday, in reaction to concerns that Petrobras’ supply may be insufficient to meet distributors’ demand.

The regulator added that it “will continue to monitor the supply chain” and “will take the required measures to mitigate distortions and reduce risks, if necessary.”

Petrobras, Brazil’s largest company and responsible for a large part of the fuel consumed in the country, on Monday acknowledged in a statement that the gasoline and diesel orders it received from distributors for November significantly exceeded those of previous months and its own production capacity.

The state-owned company added that in recent years the Brazilian market was supplied both by its own production and by fuels imported by distributors, and that this combined supply was enough to meet domestic demand.

It clarified that, in order to meet the November demand, distributors apparently increased their orders from Petrobras, which offers lower prices than the international market, and reduced their orders from foreign companies.

“Only with much advance notice would Petrobras manage to program itself to meet this atypical demand. In the comparison with November 2019 (before the pandemic), distributors’ demand for diesel increased by 20% and for gasoline by 10%,” it explained.

The volumes demanded from Petrobras for November, according to the state-owned company, are enough to supply 100% of the Brazilian market and would make the state-owned company the only supplier.

According to the oil company, it operated at 79% of its refining capacity in the first half of 2021, a higher rate than the average for 2019 (77%) and 2018 (76%). It added that in October it is operating at 90% of its production capacity.

EXPENSIVE IMPORTS

The distributors’ association admitted that, given the growth in the demand for diesel in Brazil, companies increased their orders from Petrobras “because the fuel in the foreign market is more expensive than the prices practiced in Brazil.”

“The cuts promoted by Petrobras, in some cases reaching more than 50% of the ordered volume, leave the country in a situation of potential shortages due to the impossibility of offsetting these reductions with import contracts because of the current price difference,” they argued.

“Currently, there are dozens of companies registered with the ANP authorized to import fuels. Therefore, this additional demand can be absorbed by the other market agents,” assured Petrobras in a statement in which it insisted that distributors should reduce their profit margins and guarantee the country’s demand with imported fuels.