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Petrobras shares slump as Brazil’s Bolsonaro doubles down on intervention

By Sabrina Valle and Gram Slattery

RIO DE JANEIRO (Reuters) – Petrobras shares plunged 22% on Monday, wiping out 71 billion reais ($13 billion) in market value, as Brazilian President Jair Bolsonaro again slammed its pricing policies after he replaced the state-controlled oil company’s market-friendly CEO with a retired army general.

The selloff, following a series of analyst downgrades, deepened after Bolsonaro said the company’s fuel policy was only pleasing to financial markets and select groups in Brazil and should be changed as part of an effort to lower gasoline and diesel prices.

Overall, the last few days have marked a dramatic about-face for Bolsonaro, a right-wing populist whose interventionist instincts until now had been largely contained by economically conservative allies.

Shares in state electricity company Eletrobras also plunged on Monday after Bolsonaro said it would be the next sector in which the government would “stick its finger.”

In comments to Brazil’s Radio Bandeirantes on Monday, Joaquim Silva e Luna, the man tapped by Bolsonaro on Friday to take the reins from Roberto Castello Branco, floated the idea of a government fund, or “cushion”, to lessen the effects of fluctuating fuel prices on consumers.

Bolsonaro doubled down on his criticism of Castello Branco, mocking his decision to social distance since the beginning of the coronavirus pandemic, the severity of which the president has repeatedly minimized.

“Now, the current Petrobras chief executive, let’s be very clear, has been at home for 11 months without working, working remotely. Now, the boss has to be on the front line,” Bolsonaro said, adding: “This is for me unacceptable.”


Credit Suisse, Santander, Scotiabank, Bank of America, Bradesco and XP analysts were among those who downgraded their recommendations on shares of Petroleo Brasileiro SA, as the Rio de Janeiro-based producer is known.

“A good reputation is hard to earn and easy to lose,” BTG bank analyst Thiago Duarte said in a note to clients.

Dollar-denominated debt issued by Petrobras also suffered hefty losses with the 2043 bond dropping 7.6 cents to trade at a seven-month low of 98 cents on the dollar, Refinitiv data showed.

Morgan Stanley removed its ‘like’ recommendation on Brazil sovereign bonds on Monday, citing fiscal concerns and potential spillover from the removal of Castello Branco.

Petrobras’ “all-important” pricing policy and its implications for cash generation and planned asset sales, particularly of its refineries, has clouded its debt reduction and dividend outlook, Santander analysts led by Christian Audi said in a note to clients. They downgraded their recommendation on the stock to “hold” from “buy.”

Director-General Rodolfo Saboia of Brazil’s oil regulator ANP said that the CEO change would not affect the country’s policy of opening up the refinery sector to private investment or pursuit of free markets. He declined to comment directly on Petrobras’ refinery sales.

“The best way to attempt to reach a fair price is by opening the market … and not depending on one actor to set the price a certain product should have,” he told Reuters in an interview.

In a Facebook post after the close of trading on Friday, Bolsonaro announced the nomination of Silva e Luna, a former defense minister who has been managing giant hydroelectric dam Itaipu, to replace Branco.

The retired general, who lacks any oil and gas industry experience, said in the Radio Bandeirantes interview that he had not discussed and does not have an opinion on an eventual privatization of the company.

On Saturday, Silva e Luna told Reuters that the company needed to find “balance” in fuel pricing, considering the impact on shareholders, investors, sellers and consumers.

Brazil’s securities industry watchdog CVM on Monday announced the opening of an investigation on the change of leadership, confirming an earlier Reuters report on the matter.

($1 = 5.4659 reais)

(Reporting by Sabrina Valle, Gram Slattery, additional reporting by Marta Nogueira in Rio de Janeiro; Aluisio Alves, Paula Laier and Tatiana Bautzer in Sao Paulo; Karin Strohecker and Marc Jones in London, Editing by Emelia Sithole-Matarise, Dan Grebler and Richard Pullin)

Bolsonaro’s nominee to run Petrobras stresses need for “balance” in fuel pricing

By Rodrigo Viga Gaier

RIO DE JANEIRO (Reuters) – Brazilian President Jair Bolsonaro’s nominee to lead state-run oil company Petrobras said on Saturday the company needs to find “balance” in fuel pricing, considering the impact on shareholders, investors, sellers and consumers.

Joaquim Silva e Luna, a retired army general and former defense minister overseeing the state-run Itaipu hydroelectric dam on the border with Paraguay and Argentina since 2019, was tapped on Friday to be the next chief executive of Petróleo Brasileiro SA.

Bolsonaro has criticized Roberto Castello Branco, current CEO of the state firm known formally as Petroleo Brasileiro SA, for ignoring the complaints of truckers as he hiked diesel prices 15% this week, tracking global markets higher.

Petrobras shares plunged on Friday due to growing investor fears of political interference in fuel pricing, which has triggered billions of dollars in losses over the past decade.

Luna was cautious in some of his first public comments since Bolsonaro made the announcement in a late Friday social media post, seeking to allay concerns that the company would lose autonomy to set prices in Brazil, where it dominates the market.

“There is no way to have interference in the pricing policy. There’s executive management … and we have the capacity to handle the issue. We’ll reflect on the economy as well as on the trucker who has no cargo to transport,” he told Reuters in an interview.”We need to find a balance, considering the shareholder, the market, oil prices, the currency, as well as the people, because gasoline and diesel prices have an impact on the whole chain of production. We cannot ignore this reality,” he said.

Reflecting on his background in the military and government service, Luna said he would be “a manager and not a general” at Petrobras. “My profile is to deliver results,” he added.

Current CEO Castello Branco’s term ends March 20. Cheered by investors for his efforts to sell underperforming assets and cut debt, the University of Chicago-trained economist would be the second Petrobras head in three years to leave over disagreements in fuel pricing. In 2018, then-CEO Pedro Parente resigned when the government forced fuel prices lower in a concession to striking truckers.

Parente had vowed to set domestic prices in line with global markets, breaking with a policy that made Petrobras sell fuel below international parity, triggering some $40 billion in losses from 2011 to 2014.

(Reporting by Rodrigo Viga Gaier; Writing by Tatiana Bautzer; Editing by Brad Haynes and Richard Chang)


Brazil’s Bolsonaro to oust Petrobras CEO after fuel pricing spat

By Gram Slattery, Sabrina Valle and Rodrigo Viga Gaier

RIO DE JANEIRO (Reuters) – Brazilian President Jair Bolsonaro moved to replace the head of state-run oil company Petrobras, naming a retired army general with no oil and gas experience as CEO after weeks of clashes with the current chief executive over fuel price hikes.

In a late Friday statement from the Mines and Energy Ministry, first shared on Bolsonaro’s Facebook page, the government said it had decided to appoint former Defense Minister Joaquim Silva e Luna to run Petroleo Brasileiro SA, as the firm is known formally.

Current CEO Roberto Castello Branco, backed by investors for his efforts to sell underperforming assets and cut debt, would be the second Petrobras leader in three years to fall over the political fallout from fuel pricing. In 2018, then-CEO Pedro Parente resigned when the government forced fuel prices lower in a concession to striking truckers.

Parente vowed to set domestic prices in line with global markets, breaking with a policy that made Petrobras sell fuel below international parity, triggering some $40 billion in losses from 2011 to 2014.

Similarly, Bolsonaro tangled with Castello Branco over his insistence on raising prices for diesel and other fuel as Brazil’s currency weakened and global crude prices surged. Petrobras ADRs traded in New York slumped 8.9% in after-hours trading on Friday, adding to the day’s drop of nearly 7% in its Brazil-listed preferred shares.

Petrobras has been raising fuel prices since a Feb. 5 Reuters report disclosed details of the company’s price policy, which led analysts to downgrade its shares on concerns of possible political interference.

Castello Branco’s ouster could force a broader shakeup at Petrobras, which has steered toward more market-friendly and less politically driven policies in recent years.

The company’s senior management is considering resigning en masse to protest the CEO’s replacement, three people close to the executives told Reuters on Friday evening.

Petrobras said in a statement that it had received notice from the Mines and Energy Ministry about the proposed CEO change, adding that the ministry had requested an extraordinary shareholders’ meeting.

The company’s board of directors is to meet on Tuesday in a regularly scheduled session.

Most of the board has so far proven loyal to Castello Branco, although the majority are government appointed, which could create a messy transition.

Castello Branco, whose current mandate officially expires on March 20, was appointed to lead Petrobras when Bolsonaro took office at the start of 2019.

A University of Chicago-trained economist and ally of Economy Minister Paulo Guedes, he is a strong advocate of free-market policies and has previously rebuffed the president’s complaints about prices.

But investors have been jittery about possible political interference since the oil producer confirmed it was selling fuel in Brazil below international prices for longer periods than previously disclosed, confirming a Reuters report.

The possible shakeup of senior management also puts in doubt one of the CEO’s main goals: ending Petrobras’ near monopoly in refining in Brazil, three source close to bidders said.

Silva e Luna, who has won frequent praise from Bolsonaro for his management of Brazil’s massive Itaipu hydroelectric dam on the border with Paraguay and Argentina since 2019, is little known to investors.

He would be the third military figure to occupy a key energy post: the president of Petrobras’ board and the nation’s Mines and Energy minister are both admirals.

In April 2019, just months after Bolsonaro took office, the president demanded explanations for Petrobras’ price hike, which was swiftly reversed. After company shares tumbled, Petrobras and the government assured investors that there would be no political interference in fuel pricing.

Tensions eased last year as crude prices tumbled, but truckers have renewed their complaints in recent months.

During a late Thursday announcement about lower fuel taxes, Bolsonaro made clear his dissatisfaction with Castello Branco, saying there would be changes at Petrobras “in coming days.”

Analysts and investors were jarred by the quick succession of events on Thursday and Friday.

“It’s a delicate situation, and it happened in such a disorganized way,” said Edmar de Almeida, a professor specializing in energy at the Federal University of Rio de Janeiro.

Petrobras will complete 67 years in 2021 and will have its 39th CEO – or about one head every 18 months, said UBS analyst Luiz Carvalho.

The company’s issues will persist as long as its controlling shareholder – the government – does not understand that the problem is not with the company’s executives, but with the lack of a coherent strategy from above, he said.

“While the world is moving towards an energy transition with a cleaner energy mix, in Brazil we are discussing subsidies for diesel consumers,” Carvalho said.

(Reporting by Rodrigo Viga Gaier, Gram Slattery and Sabrina Valle; Additional reporting by Marta Nogueira and Gabriel Araujo; Editing by Brad Haynes, Christian Plumb, Daniel Wallis and William Mallard)



Brazil’s Petrobras executive management in talks on possible mass resignation – sources

By Sabrina Valle

RIO DE JANEIRO (Reuters) – Petroleo Brasileiro SA’s executive management is considering resigning en masse after the Brazilian government decided to replace Chief Executive Roberto Castello Branco, three people close to the management said, asking not to be named as information is private.

President Jair Bolsonaro earlier said he had decided to appoint former Defense Minister Joaquim Silva e Luna as the state-controlled oil company’s CEO.

(Reporting by Sabrina Valle; Editing by Christian Plumb)


As power returns, Texas energy firms slowly emerge from deep freeze

By Jennifer Hiller and Erwin Seba

HOUSTON (Reuters) – Texas energy companies on Friday began preparing to resume oil and gas production after days of frozen shutdowns as electric power and water service slowly resumed at darkened oilfields and refineries.

It will take several days for oilfield crews to de-ice valves, restart systems and begin oil and gas production. U.S. Gulf Coast refiners are assessing damage to facilities. They face up to three weeks to restore most production, analysts said, with low water pressure, gas and power losses hampering operations.

The restart of production as temperatures eased sent prices of oil and natural gas lower. The spot market price of natural gas at the main U.S. trading hub in Louisiana dropped to $8.56 per million British thermal units (mmBtu) for Friday delivery from a record high of $23.86 for Thursday.

U.S. crude oil futures settled down $1.28 per barrel at $59.24. Oil is still up 23% this year, boosted by the continuation of OPEC supply cuts and falling global inventories.

Grid operator Electric Reliability Council of Texas (ERCOT) said there is enough power generation in its system to return to normal operations as it ended energy emergency conditions.

Still, refiners along the U.S. Gulf Coast could take up to three weeks to restore most operations, said Andrew Lipow, president of refinery consultants Lipow Oil Associates. That could depress demand for oil.

Millions of people across Texas shivered in the dark this week after a severe winter storm laid siege to the state, with demand for natural gas spiking and supplies needed to power electric generators and heat homes shrinking.

U.S. President Joe Biden sought a major disaster declaration to speed up relief in Texas, and vowed to visit the state next week.

Finger-pointing continued on Friday as about 165,000 homes were without power and more than 1,000 public water systems remain affected. Texas Republican Governor Greg Abbott blamed the state’s grid operator and wind turbine shutdowns for the outages. Federal regulators should investigate if the governor’s policies “exacerbated the winter storm crisis,” Democratic U.S. Sen. Charles Schumer said.

Overall economic losses could reach $45 billion to $50 billion, estimated weather forecasting firm AccuWeather, nearly as much as U.S. damages suffered during the 2020 Atlantic hurricane season.

Nearly 13% of gasoline stations throughout Texas were without either fuel or power as of early Friday, estimated price tracking service GasBuddy. That was up from around 8.5% about a day ago.

The unusually cold weather curtailed up to 4 million barrels per day of crude oil production and 21 billion cubic feet (bcf) of natural gas, according to analysts. Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.

U.S. Gulf Coast refineries are potentially less prepared for extremely cold weather than for seasonal storms, creating risks of “more prolonged refining downtime,” analysts at Goldman Sachs said.

The freeze stymied natural gas production by turning water in the gas to ice. The resulting shortage led to calls for gas conservation measures from California to West Virginia.

Texas on Wednesday ordered gas producers to halt exports needed by state utilities through Sunday, prompting Mexican officials to call the U.S. envoy to press for natural supplies.

However, pipeline gas exports from the United States to Mexico rose to 5.1 bcf on Friday after dropping to a 13-month low of 3.8 bcf per day on Tuesday, Refinitiv Eikon data showed.

In the United States, the move did not appear to affect deliveries to other states. California’s power exchange and the MISO, an exchange that handles 15 U.S. states, both said they had not seen any impact. New Mexico suffered no losses, a public regulation commission official said.

More natural gas will soon be flowing. Chevron Corp and ConocoPhillips have begun restoring shale output, and Chevron will prioritize natural gas production. Texas oil and gas regulators and a DiamondBack Energy executive also reported that power was being restored to west Texas, where oil production was shut by record snowfall and power outages.

“The majority of our Permian and Eagle Ford volumes remain offline,” said Conoco spokeswoman April Andrews, referring to the two major Texas shale fields.

Conoco, the top U.S. independent oil producer, is ready to bring back full operations across its U.S. operations outside of Alaska once power and other infrastructure outages end, she said.

(Reporting by Jennifer Hiller, Erwin Seba in Houston and Stephanie Kelly in New York, Swati Verma in Bengaluru; writing by Gary McWilliams; Editing by Leslie Adler, Aurora Ellis, Jonathan Oatis and Dan Grebler)



Bolsonaro says nominating replacement for Petrobras CEO

SAO PAULO (Reuters) – Brazil’s government has decided to nominate Joaquim Silva e Luna as the next chief executive of state-controlled oil company Petrobras, according to a post on President Jair Bolsonaro’s official Facebook account.

Roberto Castello Branco, the current CEO of the state-run oil firm known formally as Petroleo Brasileiro SA, has drawn ire from Bolsonaro for raising fuel prices despite complaints from truckers threatening to strike.

(Reporting by Gabriel Araujo; Writing by Gram Slattery; Editing by Brad Haynes)


U.S. settles with BitPay for apparent sanctions breaches

By Sarah Marsh

(Reuters) – BitPay, one of the biggest cryptocurrency payment processors, will pay $507,375 to settle its potential civil liability for apparent violations of U.S. sanctions on countries like Cuba, North Korea and Iran, the U.S. Treasury Department said.

Digital currencies, which are mostly unregulated, decentralized and anonymous, have gained popularity in recent years, especially in countries under U.S. and other sanctions, where they are seen as a way of getting around the global financial system.

Bitcoin touched a market capitalization of $1 trillion as it hit yet another record high on Friday, with world’s most popular cryptocurrency hitting an all-time high above $54,000. It has surged roughly 64% so far this month alone, fueled by signs it is gaining acceptance among mainstream investors and companies.

The U.S. Treasury’s Office of Foreign Assets Control (OFAC) said late on Thursday that it had detected 2,102 instances between 2013 and 2018 in which BitPay had allowed people apparently located in sanctioned countries to conduct transactions worth around $129,000 in total with merchants in the United States and elsewhere.

OFAC acknowledged that BitPay had implemented sanctions compliance controls as early as 2013 but it should have better screened the information it had on customers’ location through Internet Protocol (IP) addresses and other data it had access to.

“This action emphasizes that OFAC obligations apply to all U.S. persons, including those involved in providing digital currency services,” OFAC said in a statement.

BitPay said it had continued to improve its compliance program during the transaction period and since.

“Since our founding, our commitment to compliance has been continuous and unwavering,” a company spokesman told Reuters.

The illegal use of cryptocurrencies has long worried regulators and law enforcement, with U.S. Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde both calling for tighter oversight last month.

Increasing regulation is a blow people in countries like Cuba, cut off from conventional international payment systems and financial markets by the decades-old U.S. trade embargo, although traders say they will find a way around it.

While digital currencies are often thought of as a form investment, in Cuba some ordinary citizens buy them to make purchases online as well as to receive remittances.

“It’s the country in the Caribbean with most crypto activity,” said Alex Sobrino, founder of the group CubaCripto on different social media platforms where Cubans debate and trade digital currencies. “There are hundreds of thousands of Cubans using it.”

Reuters was unable to independently verify that figure.

(Reporting by Sarah Marsh; Additional Repoorting by Tom Wilson in London; Editing by Nick Zieminski)


Volkswagen in Mexico to suspend Jetta production on Monday and Tuesday

MEXICO CITY (Reuters) – Volkswagen’s Mexico unit said on Friday that a work stoppage on its Jetta model will continue on Monday and Tuesday, due to an ongoing shortage of natural gas.

“At this time we do not have an official notice to provide certainty that there will be a supply of natural gas at regular levels,” the company said in a statement.

(Reporting by Sharay Angulo, Writing by Daina Beth Solomon)


Texas oil refiners will take weeks to recover, boosting U.S. gasoline prices

By Laila Kearney

(Reuters) – Texas oil refineries shut by cold-weather disruptions may take several weeks to resume normal operations, industry experts said on Friday, helping to push up fuel prices.

About a fifth of oil processing was halted by power outages, shortages of natural gas and water this week.

Average retail gasoline prices rose 6 cents on the week and are up 9 cents in the last month, to $2.33 a gallon, the American Automobile Association said. It forecast inventories would fall, keeping prices higher through month’s end.

“We are 2-1/2 to three weeks away from restoring most operations” at affected refineries, said Andrew Lipow, president of Houston-based consultancy Lipow Oil Associates.

The refinery shutdowns will depress prices for U.S. crude oil and widen the spread between U.S. and Brent crude, Paul Sankey of independent energy researcher Sankey Research said in a note. He forecast “heavy pressure on US crude prices from returning supply into no demand from a major refining outage that will last 2-3 weeks.”

U.S. crude futures fell 1.5% on Friday, to $59.60 a barrel, as producers signaled plans to restart production. U.S. crude is up 22% year to date. U.S. gasoline futures on the New York exchange rose to $1.805 per gallon.

“The spreads tell me that crude oil will come back quicker” than refining margins, said Robert Yawger, director of energy futures at Mizuho Securities USA.

Refinery operators are assessing facilities and may need to repair any damage to pipelines, cooling towers and other equipment before slowly and carefully restarting, Lipow said.

Shortages and high prices for natural gas have also affected refiners. Texas officials this week asked natural gas suppliers to prioritize deliveries to electric utilities and residential customers, leaving less of the fuel to supply refinery operations, Lipow said.

Slowly resuming electricity and water needed to power the plants also is likely to cause delays at Texas Gulf Coast refineries beyond what is normal after business-pausing natural disasters such as hurricanes, he said.

(Reporting by Laila Kearney and Devika Krishna Kumar; editing by Jonathan Oatis)


Business confidence in Colombia dipped in January on COVID containment measures

BOGOTA (Reuters) – Business confidence in Colombia experienced a slight decline for the second consecutive month in January due to the impact of confinement measures used by authorities to control a second wave of the coronavirus, the government said on Friday.

The business confidence index fell 0.12% to 48.7% in January, the government’s DANE statistics agency said.

Colombia’s biggest cities declared neighborhood lockdowns during the last days of December and the start of January, as well as curfews and restrictions on movement to contain a second wave of the pandemic.

Business owners’ outlook on whether things would improve for companies and the country over the next 12 months deteriorated last month, according to DANE.

“This may be an indirect sign that effectively targeted closures, specific measures to restrict consumer access to goods and commerce due to the epidemiological situations that we saw in January are presenting cause for concern,” said DANE director Juan Daniel Oviedo.

Some 46.9% of business owners reported declining demand for their goods and services, as well as supply-side problems, Oviedo said.

Latin America’s fourth-largest economy contracted a historic 6.8% last year.

While both analysts and authorities expect economic recovery this year, Colombia’s central bank lowered its GDP growth projections for 2021 to a range of between 2% and 6%, with 4.5% as the most likely figure, from a previous projection of between 3% and 7%, due to the quarantines of the first month.

(Reporting by Nelson Bocanegra; Writing by Oliver Griffin; Editing by Jonathan Oatis)