Petrobras’s Best-in-the-World Stock Rally Comes With Some Risks

Petroleo Brasileiro SA, Brazil’s state-run oil giant, surged 81 percent in dollar terms in March, the biggest gain among the world’s 1,000 biggest companies. The rally masks trouble under the hood that may derail the winning streak.

Here’s the rub: The embattled crude producer hasn’t undergone any fundamental improvements. Instead, the gains have been fueled by investor euphoria that Brazilian President Dilma Rousseff, whose policy of using the company to subsidize fuel cost Petrobras about $40 billion, is on her way to being impeached over the way she accounted for government finances. That’s a shaky foundation for such a big rally, according to Adeodato Volpi Netto, the head of capital markets at Sao Paulo-based research firm Eleven Financial.

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