Petrobras cuts crude sales to China as domestic fuel margins improve -outgoing CEO

Sabrina Valle
·2 min read

By Sabrina Valle

RIO DE JANEIRO, April 12 - Brazil's Petroleo Brasileiro SA reduced crude exports to China in the first quarter of 2021 as local refining margins improved, Roberto Castello Branco told Reuters in his last interview before stepping down as chief executive officer.

China is the world's largest importer of crude oil, and had accounted for as much as 90% of Petrobras's international sales one year ago when the COVID-19 pandemic reduced mobility and corroded fuel demand in its home market. State-run Petrobras produces about 2 million barrels of crude daily.

Castello Branco served as the company's chief executive officer until he was ousted by Brazilian President Jair Bolsonaro in February. He has remained on the job in a caretaker role until today.

While China's appetite for Brazil's oil persists, Castello Branco said the premium China paid for Brazil's crude hasn't been enough to compensate for higher margins now offered by the market for gasoline and diesel.

"That makes it more profitable to produce and sell fuels than crude oil," he said.

Oil exports from Brazil to China fell by about a third in January and February compared to the same period last year, according to data from Chinese customs and Refinitiv.

Petrobras sold 37% more diesel in March, compared to the same month last year, Castello Branco said, and 15% more than in March 2019, mostly to Brazil's internal market.

Diesel consumption in Brazil driven by truck demand rose in March, when grain producers started to transport crops to the coast to export.

Brazil's demand for gasoline and aviation kerosene, on the other hand, contracted in March, Castello Branco said, as different states imposed travel restrictions to contain the coronavirus. Petrobras has been exporting surplus gasoline and directing kerosene production to diesel, he said.

Bolsonaro fired Castello after the executive increased diesel prices to match international levels, displeasing truck drivers, part of his electoral base.

Shareholders are expected to confirm his replacement, General Joaquim Silva e Luna, after a shareholders meeting on Monday afternoon. (Reporting by Sabrina Valle; Additional reporting by Chen Aizhu; Editing by Andrea Ricci)