Brazil’s Petrobras set to cut gasoline prices Wednesday

(Reuters) – Brazil’s Petrobras will reduce gasoline prices at its refineries by about 5% on Wednesday, the state-run oil company said in a statement, its first price cut since late 2021, making analysts review projections for the country’s inflation.

Federal lawmakers and President Jair Bolsonaro have been putting intense pressure on the company’s leadership to bring down prices at the pump ahead of an October election.

The government has already provided some relief to consumers by effectively capping state fuel taxes and subsidizing truckers, a key constituency for Bolsonaro, who trails leftist former President Luiz Inacio Lula da Silva in the polls.

Petroleo Brasileiro SA (PETR4.SA), as the company is formally known, said average prices will drop to 3.86 reais ($0.714) per liter from 4.06 reais. It characterized the move as consistent with its official policy of pegging domestic fuel rates to international prices, with some room for variation during periods of unusual volatility.

“This reduction follows international benchmark prices, which have stabilized at a lower level for gasoline, and is in line with Petrobras’ pricing policies,” the company said.

The move comes after three consecutive price hikes this year, including one of roughly 20% in mid-March, and takes the average prices back to levels last seen in June.

Brazil-listed preferred shares in Petrobraswere up 0.9% in afternoon trade, slightly outperforming the nation’s benchmark Bovespa equities index (.BVSP).

JP Morgan (JPM.N)revised down Brazil’s 2022 inflation outlook due to the announcement, which it called a “surprise”.

“We now look for inflation to end the year at 7.4% over year ago instead of the 7.6% we were forecasting before,” it said.

The revised projection remains far above the central bank’s official target of inflation at 3.5% this year.

($1 = 5.41 reais)

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