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Unpacking A Wild Week In Oil Markets

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Mounting bullish news from Saudi…

Truckers’ Strike in Brazil About To End, Another Coming

Petrobras

Just as the Brazilian government made some progress towards settling matters with truckers that have paralyzed the country with protests against high fuel prices, another strike is looming on the horizon: a Petrobras workers union has demanded the removal of chief executive Pedro Parente and lower fuel prices.

Union representatives have warned the government they will initiate a 72-hour strike that will begin on May 30. Parente, Bloomberg notes in a report on the developments, has been criticized about his approach to fuel pricing, but the company said on Friday he had no intention of leaving office.

Meanwhile, striking truckers have removed some of the roadblocks that wreaked havoc on Brazil last week, after the government agreed to a demand for 60 days of lower fuel prices. Losses for the first five days of the strike, however, reached US$2.6 billion (9.5 billion reias), calculations from Brazilian daily Valor Economico showed.

The protesters are also demanding a change in Petrobras’ pricing policy, which currently features a daily adjustment of prices. Government has offered protesters monthly price adjustments instead, Reuters reported last Friday, citing a source close to the negotiations.

The news sent Petrobras’ shares sharply down as investors began worrying that the recent concessions may create unfair competition that would hurt smaller non-state fuel retailers. Another cause for concern stemming from the truckers’ protests was Petrobras’ agreement to introduce a 15-day period of lower fuel prices.

Related: Goldman Bullish Despite Steep Oil Price Correction

According to three banks at least, this compromises the company’s’ pricing independence. As a result, Credit Suisse, Morgan Stanley, and BofA Merrill Lynch all downgraded Petrobras’ credit rating.

On top of all this, the latest fuel pricing events may hurt Petrobras’ chances of finding buyers for four refineries it has put up for sale as part of efforts to reduce its massive debt pile. If monthly pricing adjustments hurt fuel retailers, the logic goes, then they would unavoidably hurt the refiners that supply them, too, which would reduce the refineries’ attractiveness as assets worth buying.

By Irina Slav for Oilprice.com

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