Shares in Brazil’s state-owned oil company Petrobras plunged heavily as global oil prices take a hit due to OPEC’s decision to lower prices by 10 percent.
Many believe this move from Saudi Arabia will start a price war with Russia, who did not agree with OPEC’s decision to slash oil production in light of the Covid-19 outbreak.
In response, Petrobras plans to reduce its diesel and gasoline selling prices to its distributors, the media reported.
Due to the collapse in negotiations between Saudi Arabia and Russia, oil stocks across various exchanges in Asia-Pacific, Tokyo, Australia, Hong Kong, and the US plunged in early Monday trading. So far, global oil prices have dropped by almost 30 percent.
Petrobras’ shares too plunged by nearly a third on Monday.
The fall in share value of Petrobras could also hinder the oil behemoth’s mega plan to divest assets worth $30 billion by 2024.
In December 2019, during a presentation in Petrobras’ New York Investors’ Day, Petrobras announced that it expects to boost its equity value by 45 percent by 2021. Petrobras believed its decision to cut costs and divest its non-core assets will contribute to the increase in its equity value.
The company is also expected to become the world’s largest oil producer among publicly listed companies by 2030. However, an unprecedented event like the Covid-19 outbreak could force Petrobras to revise all its plans.
Adriano Pires, director of the Brazilian Infrastructure Center told the media, “It still has a very high debt level. That’s why it has to continue cutting costs, invest in what provides good returns, exercise capital discipline, keep prices aligned with international levels, and divest assets. It is a company which is far from being healthy but it’s on the right path.”