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Brazil Moves Closer To Petrobras Privatization

The Brazilian government is planning to move a step closer to the privatization of oil major Petrobras by including it in its privatization program, Reuters has reported, noting that analysts still remain skeptical that privatization will take place.

President Jair Bolosonaro, who is seeking re-election later this year, has been highly critical of Petrobras and its management, changing as many as three chief executives in just the past year or so. Earlier this week, the Brazilian President suggested splitting Petrobras into several parts before privatizing it.

Talk about taking the state oil major private is not new, but the move appears way too challenging for any progress to be made. Just weeks ago, the newly appointed energy ministry of Brazil said in his first news conference that the ministry would study the full privatization of Petrobras.

The state oil giant has recently been on a collision course with the President because of international crude oil price developments that have prompted Petrobras to increase retail fuel prices, especially the price of diesel, drawing the ire of the Brazilian President.

Bloomberg noted in a report from last month that there is a widely held belief in Brazil that as a state-owned company, the oil major should work to shield Brazilians from the effects of global market trends when it comes to setting local fuel prices.

Yet if the company is privatized, it will be putting the interests of its shareholders over the interests of its consumers, and that could lead to higher prices as well if international oil prices remain high.

Reuters this week quoted analysts from BTG Pactual as saying that the privatization of Petrobras would be a challenge from a political perspective and that the possibility of a deal taking place in the short to medium term “should be viewed with a great deal of skepticism."

By Irina Slav for Oilprice.com

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