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UPDATE 2-Brazil's Petrobras changes supervision structure for fuel pricing

UPDATE 2-Brazil's Petrobras changes supervision structure for fuel pricing

Reuters · 07/27/2022 13:28
UPDATE 2-Brazil's Petrobras changes supervision structure for fuel pricing

Updates share reaction, adds context

- Brazil's Petrobras PBR A has given the company's board a formal supervisory role over fuel pricing decisions, it said on Wednesday, a sensitive matter given that fuel prices have become a major election-year issue in Latin America's top economy.

In a securities filing, Petroleo Brasileiro SA, as the state-run oil company is formally known, said its board had approved a set of guidelines, under which the executives will meet quarterly with members of the board and the company's fiscal committee to discuss how it is setting fuel rates.

Crucially for investors, the company will change its official policy of pegging domestic fuel prices to international rates, and the power to set fuel prices remains with executives, Petrobras said. In the filing, Petrobras characterized the guidelines as a formalization of current practice.

Nevertheless, the market and politicians are sure to scrutinise the language of the guidelines given the Brazilian government's history of forcing Petrobras to push down pump prices. Brazilian President Jair Bolsonaro has also repeatedly criticized the company as too profitable.

Brazil-listed preferred shares in Petrobras, which had been halted in the lead up to the securities filing, popped 0.7% after trade recommenced, before ceding most of those gains. Petrobras shares were flat in afternoon trade, underperforming the 's benchmark Bovespa equities index, which was up 0.7% .BVSP.

Bolsonaro's government has cut rates at the pump by passing legislation decreasing fuel taxes. That was reflected in short-term inflation figures, with consumer prices rising 0.13% in the month through mid-July, less than expected.

(Reporting by Gram Slattery in Rio de Janeiro and Gabriel Araujo in Sao Paulo
Editing by Marguerita Choy and Barbara Lewis)

((gram.slattery@thomsonreuters.com; +55-11-95057-1453))