War-driven oil rally widens Brazil’s fuel price gap with imports

The intensifying conflict involving the United States, Israel and Iran has widened the gap between fuel prices in Brazil and international markets. Analysts consulted by Valor estimate diesel was more than 20% below import parity on Tuesday (3). Since the first strikes on Saturday, the gasoline gap has also been edging toward 20%.

Experts said the war is still in its early stages, making it hard to say whether prices will hold at higher levels. There are also questions about whether Petrobras will pass through the increases in the short term.

Before the attacks, on Friday, Petrobras’s diesel price was R$0.12 below imported product, StoneX said. By Tuesday’s close, StoneX calculated Petrobras diesel was R$0.94 below the minimum import-parity average (PPI, Brazil’s import parity price), a gap of 29.2%, and R$1.10 below the U.S. Gulf Coast average, or 35.9%. For gasoline, the gap was R$0.50, or 19.5%.

Thiago Vetter, an analyst at StoneX, said products are being repriced based on the new benchmarks. “On Tuesday, trucking companies are pointing to a R$0.20 increase in the price of diesel B, ready for consumption, compared with Monday,” he said.

Vetter said he does not expect Petrobras to raise diesel prices immediately to match international levels. The company typically waits for quotes to stabilize before making changes, to avoid passing international volatility onto the domestic market. Asked for comment, Petrobras did not respond.

The StoneX analyst said the oil company could wait until April to change diesel prices. “Petrobras should not move in a volatile moment,” he said. “The company may face some pressure from shareholders to move closer to import prices. But in an election year, it should wait longer to raise prices.”

Importers warn of wider discounts

Brazil’s fuel importers association Abicom said Petrobras diesel moved from 12% below imported levels on Friday—R$0.39—to a gap of R$1.31 on Tuesday, or 40%.

Brent crude closed on Tuesday at $81.40 a barrel, up 4.7%. Since Friday, the commodity has risen 12.31%. For the year, gains reach 33.77%. Prices accelerated after Iran threatened the passage of oil tankers through the Strait of Hormuz, which handles 20% of the oil traded globally.

A Tuesday report from Itaú BBA said the Middle East conflict has widened the divide between domestic and overseas prices. “Compared with last Tuesday, import- and export-parity prices for gasoline and diesel increased sharply, leaving PPI 18% above domestic gasoline prices and 23% above domestic diesel prices.”

Abicom president, Sergio Araujo, said consumers are likely to face higher fuel prices for some time. “Oil prices should keep fluctuating above $80 a barrel. With that, pressure on derivative prices here in Brazil should follow,” he said.

Abicom expects private refineries to pass through price increases to customers—around 30% for diesel and 10% for gasoline—varying by region.

“In regions supplied mostly by Petrobras refineries, this price increase still won’t be felt. But where consumers depend on products from private refineries or imports, there will be an impact from the higher price,” Araujo said.

Pressure on Petrobras

Marcus D’Elia, a partner at consultancy Leggio, said the firm’s calculations showed gasoline was not sold at a discount before the war broke out. Diesel, however, was about R$0.30 per liter below parity. Now both are discounted, especially diesel, which is being sold about R$0.80 per liter cheaper in Brazil.

D’Elia said oil could stabilize around $80 if the war causes only a 10-day disruption in the Strait of Hormuz. “If the crisis drags on, the barrel goes to $100. Petrobras will be forced to adjust prices,” he said.

Amance Boutin, business development manager at Argus, said that in the international market, a vessel carrying Russian diesel for delivery over the next 30 days has its cargo valued at R$4.23 per liter at the Port of Itaqui, in the state of Maranhão. “That compares with Petrobras charging R$3.17 per liter,” Boutin said.

For imported gasoline, the price stands at R$2.89 per liter, versus R$2.75 per liter charged by Petrobras. “Looking at the pattern of recent years, it’s likely [Petrobras] will wait for geopolitical tension to ease, or to crystallize as a new market reality, before deciding on an adjustment.”

Pedro Rodrigues, of the Brazilian Infrastructure Center (CBIE), said it is difficult to forecast next steps in a highly volatile environment. “Since Petrobras no longer follows PPI, it’s impossible to say whether it will adjust prices in a week or 10 days. Whenever prices need to be adjusted down, the adjustment is fast. When they need to be adjusted up, it’s slow,” he said.

Before the attack, on Friday, the diesel and gasoline gaps were 12.08% and 4.96%, respectively, CBIE said. Now, gasoline sold by Petrobras shows a gap of 22.94%, or R$0.77 per liter, the center said. Diesel has a gap of 27.08%, or R$1.22 per liter.

Source: Valor International

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