Petroleo Brasileiro SA (PETR4), Brazil’s state-run oil producer, advanced the most in three weeks after Citigroup Inc. said the company could beat peers as lower oil prices and a stronger real cut losses on imported fuel sales.
Shares of Petrobras, as the company is known, gained 2.4 percent to 17.82 reais at 11:46 a.m. in Sao Paulo. It was the biggest contributor to the 0.9 percent advance in the 53-member MSCI Emerging Markets/Energy Index. (MXEF0EN) The benchmark Bovespa Index rose 1.3 percent.
Recent weakness in oil prices and a stronger real have reduced the gap between international gasoline and diesel prices and those in Brazil, Citigroup analysts Pedro Medeiros and Fernando Valle wrote yesterday in a note to clients. Under government policy the company sells imported diesel at a discount in the domestic market. The cost of fuel imports helped send Petrobras profits to the lowest since 2004.
“Petrobras is one of Brazil’s most levered names to appreciation of the Brazilian real,” the analysts wrote. The company “benefits from higher fuel price margins on imports, since fuel prices are set in domestic currency.”
Petrobras should gain if the exchange rate stays below 2 per dollar for the next 12 months, the analysts wrote. The currency rose 0.4 percent to 1.9836 per dollar today, extending this year’s gain to 3.4 percent.
Crude oil futures fell 4.7 percent in New York last week, the most in six months.
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