Petroleo Brasileiro SA (PBR) headed for the longest losing streak in a year as plunging oil prices and currency weakness overshadowed a decision to give the state-run producer some relief from inflation-fighting policies.
Petrobras, as the Rio de Janeiro-based company is known, fell for a fifth day, losing 2.2 percent to 13.75 reais at 11:34 a.m. in Sao Paulo. Brazil's currency extended a decline against the dollar this week to 3.8 percent, the most among major currencies tracked by Bloomberg. Brent headed for a seventh straight weekly drop amid the U.S. shale boom.
With four-year low crude prices dimming Petrobras' export revenue outlook and the real's slump signaling more expensive fuel imports, investors shrugged off the government's decision to grant the company a 3 percent increase in its subsidized refinery gate prices for gasoline and 5 percent for diesel.
The "counterintuitive" measure to increase prices for the first time in a year just as the discount to global benchmarks narrows, "does nothing to improve investor confidence in the company's commitment to a pricing policy," Itau BBA Paula Kovarsky wrote in a note to clients.
Petrobras booked more than $44 billion in operating losses mainly from selling fuel at below-market prices during Brazilian President Dilma Rousseff's first term and became the world's most indebted crude producer. It was granted permission to raise fuel prices even after crude's 25 percent plunge this year brought them more into line with international benchmarks.
The decision, announced in a regulatory filing after the close of regular trading yesterday, comes after Rousseff won re-election by the narrowest margin in Brazil's history and the central bank raised rates sooner than expected last week.
"Rousseff has been very unkind to this company, it's a step in the right direction," Robbert van Batenburg, director of market strategy at Newedge USA LLC, said in a phone interview from New York. "They needed it, look at the stock."
Petrobras is the worst performing major oil company in the past four years losing investors 60 percent in dollars, data compiled by Bloomberg show.
Management received support from Finance Minister Guido Mantega at a Nov. 4 board meeting to raise fuel prices, without setting a date or an amount, said a person familiar with the matter. The company presented charts during the meeting based on an eight percent increase, the person said.
At the previous month's board meeting, Chief Executive Officer Maria das Gracas Foster said the company needs at least a 10 percent increase in fuel prices, a person with knowledge of the matter said at the time.
The board reconvened this week after suspending an Oct. 31 meeting in which it failed to reach a decision on a proposal to dismiss an executive cited in a money-laundering and bribery investigation that has put Rousseff, who was Petrobras chairwoman from 2003 to 2010, on the defensive.
Sergio Machado, head of the producer's transport unit Transpetro, said Nov. 3 that he will take 31 days unpaid leave. That followed a refusal by auditor PricewaterhouseCoopers to sign off on the company's quarterly results bearing his signature, said two people with knowledge of the issue. Machado said he's done nothing wrong and called the allegations absurd.
In a separate filing, Petrobras said its board will meet Nov. 14 to approve earnings and denied PwC rejected the results. PwC said in an e-mailed response that it can't comment on clients. The three-year audit contract ends Dec. 31.
Brent oil headed for a seventh weekly drop, the longest declining streak since November 2001, as OPEC predicted it will need to supply less crude.
Brazil's real fell to a nine-year low after the central bank signaled in minutes of its last meeting that it won't step up increases in borrowing costs, making local assets less attractive to global investors.
Grupo BTG Pactual reduced its 2015 earnings estimate for Petrobras by 14 percent, citing weaker currency and lower oil prices in a note to clients today.
"The new conditions make us see less of a chance that Petrobras' balance sheet improves," BTG analysts including Gustavo Gattass wrote. "As such, we've raised our chances for a capital increase in 24 months to 80 percent from 70 percent."
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GAZPROM - The parties discussed relevant issues related to bilateral cooperation, including the Baltic LNG project. Emphasis was placed on the priority measures aimed at developing a joint design concept (pre-FEED).
BHGE - U.S. Rig Count is up 11 rigs from last week to 1,063, with oil rigs up 8 to 869, gas rigs up 4 to 193, and miscellaneous rigs down 1 to 1. Canada Rig Count is up 13 rigs from last week to 195, with oil rigs up 8 to 127 and gas rigs up 5 to 68.
REUTERS - Brent crude futures had risen $1.02 cents, or 1.3 percent, to $81.28 a barrel by 0637 GMT. The contract dropped 3.4 percent on Thursday following sharp falls in equity markets and indications that supply concerns have been overblown. U.S. West Texas Intermediate (WTI) crude futures were up 80 cents, or 1.1 percent, at $71.77 a barrel, after a 3 percent fall in the previous session. WTI is on track for a 3.5 percent drop this week.
EIA - Brent crude oil spot prices averaged $79 per barrel (b) in September, up $6/b from August. EIA expects Brent spot prices will average $74/b in 2018 and $75/b in 2019. EIA expects West Texas Intermediate (WTI) crude oil prices will average about $6/b lower than Brent prices in 2018 and in 2019.