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Brazil Unable To Raise Oil Production In Short Order

Brazil’s state-owned oil giant Petrobras told U.S. government representatives in March that the company cannot raise production in short order to cover potential oil supply shortages after the Russian invasion of Ukraine, Reuters reported on Tuesday, citing three sources familiar with the issue.

After Russia invaded Ukraine in late February, the U.S. has reached out to many producers—and finally begged its own companies—to increase production in the short term to help bring soaring crude oil prices down. The U.S. Administration has been seeking to address the skyrocketing gasoline and diesel prices at home, which jumped even more after the war in Ukraine began amid global concerns that Russian supply would fall.

According to Reuters sources, the U.S. asked Petrobras whether it could raise crude oil production out of Brazil, but the company said it could not.

Petrobras officials told U.S. officials that oil production was the result of a longer-term business strategy, not diplomacy, and that a short-term increase in output would not be possible from a logistics point of view, the sources told Reuters.

Petrobras denied in a statement to Reuters that it had met with “representatives of the U.S. State Department” in March.

Since oil prices hit $100 a barrel after the Russian invasion of Ukraine, and U.S. gasoline prices hit a record in March, the Biden Administration has been pledging to use “every tool available” to bring gasoline prices down.

Those tools so far have included releases from the U.S. Strategic Petroleum Reserve (SPR), including the largest one in history announced in late March. The record 180-million release from the SPR came as a surprise for the International Energy Agency when it was announced in late March, since the Biden Administration hadn’t informed the IEA the massive release was coming, sources with knowledge of the matter told Reuters on Monday.

By Tsvetana Paraskova for Oilprice.com

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