Petrobras gains from expensive oil, but war in Iran exposes the state-owned company’s dilemmas

Conflict in the Middle East: the strategic role of the Strait of Hormuz The surge in oil prices on the international market, driven by the escalation of the conflict in the Middle East, places Petrobras facing a scenario with opposite effects. On the one hand, the more expensive barrel increases the company’s revenue and tends to strengthen its cash flow. On the other hand, the situation reignites debates about the state-owned company’s pricing policy, increases risks linked to the import of diesel and increases political pressure to avoid greater impacts on inflation in Brazil. 🗒️Do you have any reporting suggestions? Send it to g1 According to João Abdouni, an analyst at Levante Inside Corp, the appreciation of oil tends to improve Petrobras’ results, mainly because of exports. “The rise in oil prices has a positive impact on Petrobras’ results, especially in the export segment, which is gaining higher margins at the moment.” The reason is straightforward: when the barrel rises on the international market, the company’s foreign sales start to generate more revenue. As Petrobras is one of the main producers and exporters of oil in the world, the movement tends to reinforce the inflow of money into the company. This effect has already been observed in previous cycles of high prices. According to Vitor Sousa, an analyst at Genial Investimentos, periods in which Brent traded close to or above US$100 usually result in strong cash generation for the state-owned company. “In previous periods of high Brent, around US$ 100, Petrobras generated a massive cash flow, distributing R$ 215 billion in profits”, he states. This cash generation potential helps explain why oil companies tend to do better in times of international tension. According to Rafael Figueiredo and Maria Irene, analysts at XP Investimentos, the direct link between the price of oil and the results of these companies makes them stand out even when the stock market as a whole falls. “On sell-off days [quando há uma onda de vendas de ações que derruba os preços na bolsa]Petrobras tends to stand out positively along with other oil companies, precisely because of this direct correlation with the commodity.” Price policy returns to the center of the debate If expensive oil improves Petrobras’ results, it also reignites discussions about the way the company sets fuel prices in Brazil. Since 2023, the state-owned company no longer automatically follows fluctuations in the international market. The old model, known as import parity (PPI), was replaced by a more gradual system of adjustments. According to Marcos Bassani, analyst and partner at Boa Brasil Capital, this change helps to reduce the immediate impacts of external crises on fuel prices in the country. “Petrobras abandoned the PPI in favor of a discretionary and gradual model, which reduces the frequency of adjustments and cushions the impact of the war on the consumer in the short term”, he explains. This means that rapid fluctuations in the price of oil are not immediately passed on to gasoline or diesel sold in Brazil. The strategy seeks to avoid sudden increases in pumps, but can create challenges when the difference between domestic and international prices grows too large. According to Abdouni, Petrobras has adopted a cautious stance in this moment of volatility. “The company has been delaying the transfer of prices, preferring to wait for prices to stabilize at high levels to avoid passing on the immediate volatility to the local market”, he says. Dependence on imported diesel brings risks One of the main points of attention in this scenario is diesel. Although Brazil produces a lot of oil, the country still depends on imports of this fuel to fully meet domestic consumption. This means that large differences between the prices charged by Petrobras and international market values could discourage private companies that bring diesel from abroad. Bassani warns that this situation could create supply problems. “Large delays can discourage importers and generate supply risk”, he states. If oil remains expensive for a long time, the pressure for readjustments tends to increase. In this case, according to the analyst, Petrobras may end up having to raise prices to rebuild its margins. This balance between maintaining stable prices and preserving the company’s results is usually one of the most sensitive points in the state-owned company’s management, especially in periods of high inflation. Expensive oil can pressure inflation The rise in oil prices doesn’t just affect Petrobras’ results. The impact spreads throughout the economy. Diesel, for example, is the main fuel used in cargo transport in Brazil. Therefore, when its price rises, the cost of shipping tends to increase — and this ends up being passed along the production chain. According to Jhonny Martins, accounting specialist and vice-president of SERAC, the impact goes far beyond transport. “Fuel is not just a transportation cost. It affects the entire production and logistics chain”, he says. As a consequence, the rise in fuel prices can reach the final consumer in the form of more expensive products and services. “Dependence on the import of diesel and gasoline means that international prices directly influence the domestic market, resulting in higher prices in supermarkets and services”, says Martins. Furthermore, the uncertainty caused by the conflict makes financial planning difficult for many companies. According to the expert, the lack of predictability about costs makes it more difficult to calculate expenses and set prices. Very high oil is also a concern. investors Despite the gains for companies in the sector, very high oil prices can also cause concerns for the financial market. According to an XP report, there is a range considered more favorable for the performance of the economy and the Brazilian stock market. When a barrel is between US$60 and US$70, the impact tends to be positive. analysts. This is because more expensive energy puts pressure on inflation and could make it difficult to reduce interest rates, affecting several sectors of the economy. Even among oil companies, some analysts recommend caution at this time. For Vitor Sousa, from Genial Investimentos, part of the positive scenario may already be reflected in stock prices. be a risky move – which is why the current recommendation for some companies is to just maintain their positions. Petrobras headquarters building, in the center of Rio Marcos Serra Lima/g1.

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