Petrobras (PETR3; PETR4) Production Soars 7.6% in December, Driven by Pre-Salt

Petrobras reported a strong rise in oil and natural gas production in December, with output climbing 7.6% month over month to 3.218 million barrels of oil equivalent per day (boed), driven largely by pre-salt fields. Oil production rose 7.2% to 2.459 million barrels per day, while natural gas output increased 8.8%, according to Brazil’s oil regulator ANP.

For full-year 2025, Brazil set a new production record, with total oil and gas output reaching 4.897 million boed, up 12.7% versus 2023. Petrobras, responsible for nearly 90% of national production, benefited from the pre-salt layer, which accounted for almost 80% of total output.

Despite the strong operational performance, Petrobras shares faced mixed assessments from financial institutions. Bradesco BBI downgraded the stock to neutral, citing limited upside after a sharp rally and weak fundamentals supporting global oil prices amid rising supply. BTG Pactual also maintained a neutral stance, warning that dividends may fall short of expectations due to higher capital expenditures and non-recurring cash outflows.

Goldman Sachs, however, reiterated a buy recommendation, highlighting attractive medium-term dividend yields and potential political catalysts tied to Brazil’s electoral cycle.

Petrobras shares declined during the session as Brent crude fell around 5% following signs of easing geopolitical tensions between the United States and Iran, reinforcing concerns over global oil oversupply. The drop occurred despite Brazil announcing record oil production levels for 2025.

Beyond short-term market volatility, Petrobras drew attention for the scale of its proven reserves, estimated at 12.1 billion barrels of oil equivalent. Analysts note that the company continues to replace production with new discoveries, underscoring operational efficiency. While theoretical valuations suggest reserves alone could justify a much higher share price, investors continue to apply a discount reflecting oil price volatility and governance risks linked to Petrobras’s state-controlled status.

Ibovespa Reaches All-Time High as Dollar Weakens After Trump Tariff Retreat

Former U.S. President Donald Trump has announced the cancellation of planned tariffs on European nations following discussions with NATO leadership, pointing to a tentative framework for a future deal on Greenland and Arctic security. The move marks a rare reversal in Trump’s recent hardline trade rhetoric toward Europe and comes amid growing concerns over transatlantic relations, NATO cohesion, and market volatility.

Trump Cancels Planned Tariffs on Europe

In a post on his Truth Social platform, Trump said he would no longer impose a 10% tariff on eight European countries, which had been scheduled to take effect on February 1. The tariffs were initially framed as retaliation against European support for Greenland amid renewed U.S. pressure over the strategically critical Arctic territory.

According to Trump, the reversal followed what he described as a “very productive meeting” with NATO Secretary General Mark Rutte, during which both sides agreed on the framework of a future deal covering Greenland and the broader Arctic region.

“This solution, if consummated, will be a great one for the USA and all NATO nations,” Trump wrote, adding that discussions are also underway regarding the Golden Dome missile defense system as it relates to Greenland.

Ibovespa Hits Fresh Record as Foreign Capital Floods Brazil and the Dollar Weakens

Brazil’s stock market extended its historic rally on Thursday (22), with the Ibovespa jumping 2.2% to a new all-time closing high of 175,588 points. During the session, the benchmark index briefly surpassed the 177,000-point mark, reinforcing a streak of consecutive records seen throughout the week.

Meanwhile, the U.S. dollar fell 0.67% against the Brazilian real, closing at R$ 5.28, its lowest level since November. The combination of strong equity inflows and currency appreciation underscores a broader global rotation of capital toward emerging markets, with Brazil emerging as one of the main beneficiaries.

Foreign Capital Drives Brazil’s Stock Market Rally

Market participants point to robust foreign inflows as the primary driver behind the Ibovespa’s performance. Global investors have been reallocating part of their portfolios toward emerging markets perceived as less exposed to rising tensions between the United States and Europe.

Brazil, with its deep exposure to commodities and high real interest rates, has become an attractive destination for international capital seeking diversification and protection amid geopolitical uncertainty.

Data from B3 indicate that foreign investors have injected between R$ 9 billion and R$ 10 billion into Brazilian equities in recent days, a volume that, while modest by global standards, has a significant impact on domestic prices.

Dollar Weakness, Not Real Strength

According to market analysts, the recent appreciation of the Brazilian real reflects broad-based dollar weakness, not isolated strength in Brazil’s currency. The U.S. dollar has been losing ground not only to the real but also to other emerging-market currencies, including the Chilean peso.

This shift suggests a change in global risk perception. Traditionally, periods of uncertainty favor the dollar. Recently, however, investors have increasingly turned to commodities such as gold and silver as safe havens. As those assets became more expensive, capital began flowing into commodity-linked equity markets, including Brazil.

Commodities and Blue Chips Lead the Charge

The Ibovespa’s rally has been led primarily by blue-chip stocks, particularly companies tied to commodities such as Vale (VALE3) and Petrobras (PETR3; PETR4), as well as major banks. These stocks offer the liquidity foreign investors require, allowing them to enter and exit positions efficiently.

Petrobras experienced intraday volatility, rising sharply before retreating as oil prices softened. Even so, the broader commodities complex continues to provide structural support to the index.

Analysts note that smaller-cap stocks remain largely sidelined, as many lack the liquidity demanded by large international funds.

Global Context: U.S. GDP and Market Rotation

The positive sentiment was reinforced by fresh data from the United States. The U.S. economy grew 4.4% in the third quarter of 2025, marking its fastest pace since 2023. While strong growth could justify higher interest rates in the U.S., markets are increasingly focused on political uncertainty surrounding the Federal Reserve and the White House.

Unconventional fiscal and trade policies under President Donald Trump, combined with ongoing tariff disputes, have led global investors to trim marginal exposure to U.S. assets and reallocate small portions to other regions, including Latin America, Asia, and Europe.

Davos: Calm Markets, Confusing Signals

At the World Economic Forum in Davos, market reaction was muted. Trump’s speech drew attention more for its erratic tone than for concrete policy signals, oscillating between calls for peace and renewed geopolitical provocations, including earlier remarks on Greenland.

While Davos itself did not generate immediate volatility, Trump’s recent retreat from aggressive trade measures against Europe helped ease global risk sentiment, indirectly supporting emerging-market assets like Brazilian equities.

High Real Rates and the Carry Trade Advantage

Brazil continues to offer one of the highest real interest rates in the world, with inflation-adjusted returns estimated between 7% and 9% annually. This differential sustains carry trade strategies, attracting global capital into both Brazilian fixed income and equities.

Even with expectations of future rate cuts, analysts believe the pace of easing will be gradual, keeping Brazil’s yield advantage intact through much of the year.

Can the Rally Continue?

Market consensus suggests that the Ibovespa still has room for further gains, particularly if interest rate cuts begin to be signaled more clearly by Brazil’s Central Bank. Lower rates tend to boost equity valuations by improving cash flow projections and reducing financing costs.

However, analysts caution that sustaining levels above 170,000 points in the long term will require broader participation beyond commodities and banks. A sustained rally would depend on:

• A clearer cycle of interest rate cuts

• The return of domestic investors to equities

• Improved inflows into equity and multi-asset funds

Elections and Political Risk: A Secondary Concern

Despite Brazil heading into an election cycle, political noise has not yet become a decisive factor for foreign investors. Historically, volatility rises closer to elections, but for now, global dynamics outweigh domestic politics.

That said, markets remain sensitive to rumors and polling shifts. Past episodes have shown that even minor political headlines can trigger sharp, short-term corrections.

A Global Rotation That Favors Brazil

The current Ibovespa rally reflects a global rebalancing of portfolios, not a mass exodus from U.S. markets. The United States remains the dominant destination for global capital, but marginal reallocations, even as small as 5%, are enough to significantly move prices in markets like Brazil.

As long as geopolitical uncertainty persists, commodities remain relevant, and Brazil’s real rates stay elevated, foreign capital is likely to keep flowing into Brazilian assets, supporting both the stock market and the currency.

The Global Biofuel Shift: How Brazil’s Ethanol Strategy Navigates the China-US Rivalry

The global energy landscape is undergoing a structural transformation, and at the heart of this shift lies Brazil. As the world’s leading producer of sugarcane ethanol and a rapidly growing player in corn-based biofuels, Brazil finds itself in a strategic sweet spot between two superpowers: China and the United States. While the U.S. has long been a traditional partner, China’s recent pivot toward Brazilian ethanol as a cornerstone of its green transition is redefining trade dynamics and sending ripples through global commodity markets.

China’s interest in Brazilian ethanol is driven by a pragmatic necessity to meet ambitious carbon reduction targets. With a goal to integrate sustainable aviation fuel (SAF) into its massive aviation sector, which consumes over 80 million tons of fuel annually, Beijing has identified Brazil’s ethanol as a superior alternative to its current reliance on recycled cooking oil. This move is not just about environmental goals; it is a strategic play for self-sufficiency and unity among Global South nations, especially as trade tensions with the U.S. escalate over tariffs and protectionist policies.

The rise of corn ethanol in Brazil is a game-changer that brings both opportunities and complex market challenges. Historically, Brazil’s ethanol production was dominated by sugarcane, but corn-based production is projected to reach nearly 10 billion liters in the current cycle, with capacity potentially doubling by the early 2030s. This expansion is creating a "structural shift" in the domestic market, as corn ethanol begins to compete directly with sugarcane for market share. This competition is likely to depress ethanol prices at the pump, benefiting consumers but squeezing the profit margins of traditional sugarcane mills.

Corn Ethanol Expansion Strengthens Brazil’s Livestock Industry Through DDG Supply

This rapid growth in the 100% corn-based ethanol sector has had a significant and positive impact on Brazil’s livestock industry, particularly in Mato Grosso, home to the country’s largest beef cattle herd. Cattle ranchers in the state view this expansion favorably, mainly due to the increased availability of dried distillers grains (DDG).

DDG is a valuable co-product of ethanol production, obtained from the fermentation of corn starch. With a low moisture content of approximately 10% to 12%, it is easy to store and has become a key component of animal nutrition. Modern livestock farming is built on four main pillars, genetics, nutrition, management, and animal health, with nutrition playing a central role in economic efficiency and profitability.

DDG is especially valued for its crude protein content, which typically ranges from 25% to 32%. This makes it a competitive substitute for soybean meal, which generally contains around 43% crude protein, offering a more cost-effective option and helping to reduce feed costs for producers. The use of DDG in cattle nutrition is well established in the United States, and as Brazil’s corn ethanol industry expands, the product is increasingly reaching international markets.

In 2025 alone, ethanol producers in Mato Grosso exported approximately 73,000 metric tons of DDG, generating revenues of $22.4 million, according to a survey by the Federation of Industries of Mato Grosso (FIEMT).

Beyond the fuel pumps

The repercussions of this corn ethanol boom also extend to the global food and sugar markets. As more corn is diverted to ethanol production, the competition between domestic consumption and exports is intensifying. This trend, coupled with falling corn stocks in China and a potential resumption of large-scale Chinese imports, could drive corn prices significantly higher, echoing the peaks seen in previous harvest cycles. Furthermore, as Brazilian mills face increased competition from corn ethanol, they may pivot back toward sugar production, potentially flooding the global sugar market and impacting international prices at a time when they are already under pressure.

The geopolitical implications are equally significant. The strengthening Brazil-China relationship, characterized by high-level diplomatic engagements and discussions on financing through the BRICS framework, signals a move toward greater economic integration that bypasses traditional Western-centric financial structures. For Brazil, this means balancing its "best moment" in relations with China, its largest trading partner for soy, iron ore, and meat, with the volatile trade environment shaped by U.S. policy.

Ultimately, Brazil’s role in the global energy transition is no longer just about being a supplier of raw materials. It is about navigating a complex web of industrial competition, food security, and superpower rivalry. As the world watches the development of sustainable aviation (SAF) and maritime fuels, Brazil’s ability to manage the delicate balance between corn and sugarcane, and between Beijing and Washington, will determine its standing as a sovereign leader in the new green economy.

Petrobras's (PETR3; PETR4) Strategic Shift: Brazil's Oil Giant Driving Energy Transition and Market Records

As Brazil’s stock market reaches a historic milestone, surpassing the 170,000-point mark on the Ibovespa, driven by a strong wave of foreign investment, Petrobras is standing at the center of this momentum. Operating at near-full capacity, the state-controlled oil giant has become a key pillar supporting investor confidence and market optimism.

Petrobras is not only benefiting from the current rally but actively shaping it through efficiency gains, record production levels, and a clear strategic shift toward cleaner energy.

Petrobras Refining at Near-Full Capacity Boosts Investor Confidence

The Ibovespa’s move above 170,000 points this Wednesday (21) was fueled by the strong performance of large-cap stocks, with Petrobras playing a central role. When Brazil’s main index climbs to record highs, it reflects confidence in both corporate earnings and the broader economy, and Petrobras’ operational strength is a major part of that equation.

Between 2023 and 2025, Petrobras refineries operated with an average Total Utilization Factor (TUF) of 92%, up from 88% in 2022. Over the same period, the company increased average oil product output by 3% and expanded S-10 diesel production capacity by more than 20%, adding 138 thousand barrels per day (kbpd).

These numbers clearly signal improvements in operational efficiency, asset optimization, and sustained investment in refinery modernization. The result has been a more resilient supply of high-quality fuels with a lower environmental impact.

S-10 Diesel Expansion Cuts Imports and Improves Air Quality

The expansion of S-10 diesel, Brazil’s lowest-sulfur diesel, was made possible through projects at the Reduc, Replan, Revap, and Rnest refineries. By boosting domestic output, Petrobras has reduced the country’s dependence on imports while also contributing to cleaner air, given the fuel’s lower sulfur content.

William França, Petrobras’ Executive Director of Industrial Processes, summarized the strategy clearly, and I agree with his assessment:

“The projects implemented in recent years have steadily increased the capacity and operational flexibility of our refining system. The expansions at our refinery units are the result of efficiency gains, process modernization, and applied engineering, always with a focus on safety and operational reliability.”

Efficiency gains have translated directly into new records. From 2023 to 2025, average diesel production rose 3.1%, while gasoline output jumped 9.3%, reaching historical averages of 419 thousand barrels per day of gasoline and 452 thousand barrels per day of S-10 diesel.

Petrobras Biorefining Strategy Strengthens Brazil’s Energy Transition

One of the most compelling elements of Petrobras’ long-term strategy is its advance in biorefining. The company’s refineries are already adapted to produce renewable diesel (Diesel R), with current capacity of around 74 thousand cubic meters per month. Petrobras already markets R5 diesel, widely used in public transportation fleets.

Looking ahead, the roadmap for sustainable fuels is becoming clearer:

• Sustainable Aviation Fuel (SAF): Petrobras refineries have been adapted through co-processing routes, allowing airlines operating in Brazil to begin using SAF from 2027, in line with the Future Fuel Law and the mandatory phase of Corsia, the ICAO emissions-reduction program.

• Dedicated Renewable Fuel Plants: The company is running a bidding process to build its first plant dedicated to 100% renewable fuels at the Presidente Bernardes Refinery (RPBC), with capacity of 15 kbpd.

• Pioneering Renewable Operations: By the end of the first quarter, Petrobras will begin operating at Refinaria Riograndense (RPR), the first refinery in Brazil to run entirely on renewable feedstock.

Offshore Investments: Petrobras Drives Decarbonization in the Naval Industry

Even as Petrobras accelerates its refining and biorefining transformation, its core oil and gas operations continue to drive major investments across Brazil’s industrial chain, especially in the naval sector.

Recently, Brazil’s development bank, BNDES, approved R$ 1.98 billion in financing for Bram Offshore Transportes Marítimos to build six hybrid offshore support vessels (PSV 5000 class). These vessels will operate under 12-year charter contracts with Petrobras, transporting supplies between offshore platforms and onshore bases.

The project is expected to generate 620 direct jobs during construction and features hybrid diesel-electric propulsion, battery banks, and shore power connection. From my perspective, this is a clear example of how Petrobras’ long-term operational demand is accelerating the adoption of cleaner, more efficient technologies throughout its supply chain.

How Petrobras Is Shaping Financial Markets While Driving Brazil’s Energy Transition

Taken together, these developments reinforce Petrobras’ dual role in Brazil today. On one hand, the company is delivering strong operational results with near-full refinery utilization, record fuel production, and reduced import dependence. All of this helps sustain the historic rally in the Brazilian stock market. At the same time, the company is steadily advancing toward a more diversified, cleaner, and more sustainable energy matrix. 

From refining efficiency to biorefining leadership and green investments in offshore logistics, Petrobras is not merely adapting to the energy transition, but actively shaping it, while helping anchoring investor confidence in Brazil’s economy.

Petrobras (PETR3; PETR4), Fertilizers and Shareholders: Revival of FAFEN Plants Rekindles Strategic Debate in Brazil

January marks a significant step forward in the restart of Brazil’s nitrogen fertilizer industry, as Petrobras resumes operations at its fertilizer plants in the Northeast. In Sergipe, the FAFEN unit, which had already restarted ammonia production on December 31, began producing urea on January 3. In Bahia, the Camaçari plant completed maintenance in December and is currently in the commissioning phase, with urea production expected to begin by the end of January.

Together, the two plants will produce ammonia, urea and ARLA 32 (Automotive Liquid Reducing Agent), with initial investments of approximately R$38 million in each facility. The restart of the FAFEN units has already generated around 1,350 direct jobs and 4,050 indirect jobs, reinforcing their relevance for regional development.

Production Capacity and Market Impact

The Sergipe plant, located in Laranjeiras, has the capacity to produce 1,800 tonnes of urea per day, equivalent to about 7% of Brazil’s domestic market. The Bahia unit, in Camaçari, can produce 1,300 tonnes per day, corresponding to roughly 5% of national demand. Operations in Bahia also include the Ammonia and Urea Maritime Terminals at the Port of Aratu, in Candeias.

According to Petrobras, the two FAFEN units, together with Araucária Nitrogenados S.A. (ANSA) in Paraná, will be responsible for supplying around 20% of Brazil’s total urea demand.

“Our expectation is to increase domestic production to 35% in the coming years, including a new plant under construction in Mato Grosso do Sul,” said William França, Petrobras’ Executive Director of Industrial Processes and Products.

Strategic Rationale: Reducing Dependence on Imports

Brazil currently imports nearly all the urea it consumes. Petrobras argues that resuming domestic production is a strategic move to reduce external dependence, strengthen the agribusiness supply chain and enhance food security.

The nitrogen fertilizers produced by the FAFEN units are expected to serve not only agriculture, including urea for crops and for animal feed, but also industries such as textiles, paints, and pulp and paper. ARLA 32 production is also highlighted as a contribution to reducing vehicle emissions and supporting environmental goals.

“This is a strategic action,” França emphasized. “It uses natural gas as the main input, expands allocation alternatives for Petrobras’ gas production and generates value for industry, agriculture and the country.” 

The Critical View: Fertilizers as a Costly Detour for Petrobras Shareholders

While the restart of the FAFEN plants has been widely celebrated by regional leaders and industrial policy advocates, market analysts and energy sector specialists warn that Petrobras’ return to fertilizers may revive old problems, particularly for shareholders.

Critics recall that Petrobras previously operated a fertilizer subsidiary, Petrofértil, which failed to make Brazil self-sufficient and generated heavy financial losses, ultimately leading to its shutdown. In their view, the renewed push into fertilizers is driven less by economic rationale and more by geopolitical concerns, especially after Brazil’s exposure to Russian supply disruptions following the Russia–Ukraine war.

For many economists, market analysts and investors, if producing fertilizers in Brazil were economically attractive, the private sector would already be doing it. For them, Petrobras should focus on producing oil and natural gas, rather than subsidizing an industry that has historically only delivered losses

From this perspective, the core issue is competitiveness. Fertilizer production depends heavily on cheap natural gas, something Brazil lacks. 

This dynamic highlights a clear divergence of interests: investors prioritize short-term returns and capital discipline, whereas the Brazilian government frames fertilizer production as a strategic tool to reduce Brazil’s structural dependence on imports.

In 2024, Petrobras reached the milestone of one million individual shareholders on the Brazilian stock exchange. Despite being a publicly traded company, its controlling shareholder remains the Brazilian government, making Petrobras a state-owned mixed-economy company. This structure means that strategic decisions also take national security considerations into account, especially after the war in Ukraine exposed Brazil’s vulnerability and heavy dependence on imported fertilizers. Currently, the country imports more than 80% of its fertilizer needs, largely from suppliers such as Russia and Belarus.

Gas Prices, Environmental Licensing and Structural Barriers

Critics highlight that Brazil’s natural gas is offshore and expensive, unlike Russia or Canada, where abundant and cheap gas underpins global fertilizer leadership. Environmental licensing is also commonly cited as a major obstacle, both for shale gas exploration and for potash mining, particularly in the Amazon region.

As a result, domestically produced fertilizers tend to be more expensive than imported ones, unless production is heavily subsidized, this could reduce short-term shareholders profits. That, in turn, raises concerns among investors and is not good news for PETR3 and PETR4.

Will Fertilizers Become Cheaper for Consumers?

Supporters of the restart argue that domestic production could stabilize supply and potentially reduce costs over time. Skeptics disagree, noting that fertilizer prices tend to follow international benchmarks and that any subsidy would distort market signals.

In theory, cheaper fertilizers could lower food prices, but in practice, margins are usually captured along the chain, and consumers rarely see the full benefit.

There is also concern that subsidized fertilizers could undermine efficiency in agribusiness and weaken Brazil’s long-term competitiveness by masking structural inefficiencies.

Industrial Policy vs. Shareholder Value

The debate reflects a broader tension within Petrobras’ strategy. On one side, the company and labor organizations argue that fertilizers fit into a re-verticalization strategy aligned with energy transition, bio-refining and national development goals. On the other, investors fear mission creep.

From the industrial policy standpoint, Petrobras’ Business Plans for 2025–2029 and 2026–2030 explicitly mark a return to fertilizers, reversing the divestment cycle of 2016–2022. Around US$1 billion has been allocated to fertilizers over the next five years, alongside expanded investments in natural gas processing.

Supporters see this as rebuilding strategic capabilities dismantled in the past decade. Critics see a dilution of focus.

Analysts indicate that Petrobras is one of the world’s best offshore oil producers. For them, that’s where capital should go, especially with new frontiers like the Equatorial Margin.

What This Means for Petrobras (PETR3; PETR4) and Its Shareholders

For shareholders, the fertilizer debate introduces uncertainty. In the short term, the restart of FAFEN plants supports regional economies and aligns with government priorities. In the long term, the key question remains whether Petrobras can operate fertilizers profitably without repeating past losses.

The market reaction is likely to balance optimism about industrial recovery with caution over capital discipline. As Brazil seeks to reduce its dependence on imported fertilizers, Petrobras finds itself once again at the center of a strategic dilemma: serve as an instrument of national policy or focus strictly on maximizing shareholder returns.

The answer will shape not only the future of fertilizers in Brazil, but also the investment thesis behind Petrobras shares in the years ahead. However, we cannot overlook the fact that Petrobras is widely recognized as one of Brazil’s most innovative companies, particularly in the energy sector. Its leadership in innovation is largely driven by its pioneering work in ultra-deepwater oil exploration technologies, an area in which the company is regarded as a global benchmark. The development of the pre-salt layer, one of the largest oil discoveries of the century, stands as a concrete example of how technological capability has translated into operational success.

This culture of innovation is further reinforced by the work carried out at Cenpes (Petrobras Research Center), one of the largest R&D hubs in Latin America, responsible for developing technologies that increase efficiency, reduce costs and improve sustainability across the energy value chain.

From this perspective, Petrobras’ technological expertise could also prove decisive in the fertilizer segment. Its ability to optimize industrial processes, manage complex operations and integrate natural gas supply chains suggests that, under the right economic and regulatory conditions, the company may be able to operate fertilizer production successfully. If so, Petrobras would not only remain competitive in global energy markets, but also leverage its innovation capacity to expand into strategic industrial segments, contributing to Brazil’s long-term energy and food security.

US-Venezuela Crisis and the Future of Oil: How Petrobras (PETR3; PETR4) is Strengthening its Position with the Búzios Field

The crisis between the US and Venezuela has immediate and potential medium-term implications for global energy markets, particularly crude oil prices and investment flows.

Brazil’s national oil company Petrobras has been steadily increasing production in the pre-salt Santos Basin, with the FPSO P-78 platform (Búzios 6) starting production late December 2025. It can produce up to ~180,000 barrels of oil per day plus significant volumes of natural gas, helping raise the Búzios field’s total capacity to over 1.15 million barrels per day.

More broadly:

• Búzios is already Petrobras’ largest production hub, with multiple FPSOs online and plans for still more through 2030.

• Petrobras reported strong production and financial results through 2025, with robust cash flow and high offshore output, underpinning its growth targets.
  

However, energy markets have been volatile, with Brent oil prices softer at times, and geopolitical shocks like the Venezuela operation tend to inject short-term volatility, risk premia in oil prices, and uncertainty for investors.

For Petrobras, greater global supply, especially if Venezuelan oil re-enters markets under U.S. control, could exert downward pressure on prices. However, diversified Brazilian production and long-term infrastructure projects likely provide resilience.

Current State and Outlook for Petrobras

Petrobras continues to:

• Deliver strong production growth from the pre-salt, especially Búzios.
  

• Expand natural gas exports, boosting Brazil’s energy mix.
  

• Maintain profitable operations with competitive production costs.
  

Near-term risks include:

• Global oil price fluctuations.
  

• Environmental and regulatory challenges (e.g., drilling delays in some basins).
  

Medium- to long-term growth remains anchored by deepwater assets such as Búzios, with projected further FPSO deployments and infrastructure investments through the end of the decade.

The U.S. action in Venezuela has intensified geopolitical tensions and will likely ripple through global energy politics. For Petrobras, the immediate operational outlook remains strong due to ongoing expansion in the pre-salt and rising output. Global market volatility may continue, but Brazil’s offshore production and new platforms like Búzios 6 position Petrobras to weather external shocks while pursuing growth. 

Petrobras (PETR3; PETR4) at a Crossroads: Venezuela’s Crisis, Carbon Research, and the Future of Brazilian Fuel

Political instability in Venezuela and growing uncertainty over the future of its oil industry may have direct and indirect consequences for Petrobras and fuel prices in Brazil. While a potential increase in Venezuelan oil supply could push global crude prices lower, analysts warn that Brazilian consumers may not fully benefit due to limited transparency in Petrobras’ pricing policy.

The global energy landscape is shifting rapidly, and at the center of this transformation is Petrobras, Brazil's state-owned oil giant. From the geopolitical tremors in Venezuela to groundbreaking carbon stock research and the expansion of cleaner fuels, the company is navigating a complex web of challenges and opportunities that will define Brazil's economic and environmental future.

Venezuela, U.S. Influence, and Global Oil Prices

If the United States succeeds in expanding control over Venezuela’s oil reserves and reopening the country to private investment, global oil markets could respond with downward pressure on crude prices.

“If the market believes that the U.S. will effectively take control of Venezuela and that American and other private companies will return to investing there in the short term, the tendency is for oil prices to fall,” says economist Adriano Pires, founder and director of Brazil’s Center for Infrastructure Studies (CBIE).

Lower oil prices typically reduce revenues for oil producers. In 2025, crude markets already faced sharp declines: WTI crude fell nearly 20%, its worst annual performance since 2020, while Brent crude dropped around 14%. “For Petrobras, this is not positive, because it means lower revenue,” Pires notes.

Short-Term Volatility, Long-Term Pressure

In the immediate aftermath of geopolitical shocks, oil prices often rise due to uncertainty. Following the initial escalation in Venezuela, crude prices briefly increased by about 1%.

“Instability tends to push prices up in the short term,” explains Marcelo Godke, a specialist in international business law. “But in the medium to long term, the scenario points in the opposite direction, toward lower prices.”

If Venezuelan production expands sustainably, the increase in global supply could weigh on oil prices for years, affecting Petrobras’ profitability and investment capacity.

What Happens to Petrobras and Other Brazilian Oil Companies?

The medium- and long-term effects on Brazilian oil companies remain uncertain. A sustained drop in global prices would reduce margins, while increased competition could reshape regional dynamics.

Brazil’s Vice President and Minister of Development, Geraldo Alckmin, downplayed immediate concerns, emphasizing that Venezuela’s production recovery would require significant investment and time, not something achievable “overnight.”

At the same time, a reopening of Venezuela’s oil sector could create new business opportunities. Smaller oil fields may attract mid-sized companies, including Brazilian firms such as PetroReconcavo and Prio, rather than global majors like Chevron.

However, rising geopolitical instability in Latin America may discourage foreign capital, limiting the speed and scale of investment.

Will Brazilian Oil Exports Be Affected?

According to economists, Brazil’s oil export volumes are unlikely to face major disruptions in the short term.

Economist Simão Silber, a professor at the University of São Paulo (USP), explains that increased Venezuelan supply, particularly if directed toward the United States, could shift trade flows rather than eliminate Brazilian exports.

“Other markets, especially in Asia, may become more favorable for Brazil if Venezuelan oil is redirected,” Silber says. Historically, Venezuela supplied large volumes to China, a country with limited domestic oil reserves.

Brazil’s production and export levels will also continue to be influenced by OPEC+, the expanded oil producers’ group that includes Venezuela. While OPEC+ sets production quotas, its influence has weakened in recent years, with some members, including Saudi Arabia, previously exceeding agreed limits.

Will Fuel Prices Fall in Brazil?

Lower global oil prices could, in theory, lead to cheaper gasoline and diesel at Brazilian fuel stations. In practice, the outcome is far less certain.

Since the beginning of President Luiz Inácio Lula da Silva’s third term, Petrobras has adopted a new pricing policy to reduce exposure to international price volatility. However, the pricing formula has not been fully disclosed, limiting predictability.

“Fuel prices in Brazil are highly controlled,” Silber explains. “Any adjustment will depend primarily on government decisions. If prices change, the tendency would be downward, not upward.”

Adriano Pires adds that political considerations, including inflation control and interest rate policy, may increase pressure for price cuts. Fuel prices have a broad impact on inflation, and lower costs could even create room for monetary easing.

The "Carbon Countdown": A $108 Million Scientific Bet

In a move toward environmental accountability, Petrobras and Shell have announced a joint investment of R$ 108 million (approx. $21 million USD) to fund the Carbon Countdown project. This massive research initiative, led by the University of São Paulo (USP), aims to map carbon stocks in soils and forests across all Brazilian states by 2030.

Key Features of the Carbon Countdown Project

While the project is hailed as a step toward "energy security and decarbonization" by Shell’s Alexandre Breda, some NGOs, such as the Arayara International Institute, warn of potential conflicts of interest. They argue that fossil fuel companies might use such data to legitimize carbon credits while continuing oil exploration, a practice often criticized as greenwashing.

Boosting Cleaner Energy: The Rise of Diesel S-10

Amidst these geopolitical and environmental debates, Petrobras is also focusing on operational efficiency. The Henrique Lage Refinery (Revap) in São Paulo has recently expanded its production capacity for Diesel S-10 by 80%.
This low-sulfur fuel is crucial for reducing pollutant emissions and meeting the demands of modern, high-efficiency engines. By optimizing its refining park, Petrobras is shifting its focus from the older S-500 diesel to the cleaner S-10 variant, aligning with stricter environmental standards and market trends.

Uncertainty Still Dominates the Outlook

Despite market speculation, the carbon research, and the future of Brazilian fuel, the coming months for Petrobras remain shrouded in uncertainty, mainly due to the still unclear situation in Venezuela and that country's oil production.

“We still don’t know how a political transition would unfold,” says political scientist Leonardo Paz, from Fundação Getulio Vargas (FGV). “Will new elections be held? Who will effectively govern? These questions remain unanswered.”

If political instability persists and production fails to recover, oil prices could move in the opposite direction, rising instead of falling.

“We need to be very cautious,” says economist Carlos Honorato, from FIA Business School. “There is no immediate positive news for oil supply yet.”

What This Means for Brazil

The Venezuelan crisis highlights how geopolitics, energy markets, and domestic policy intersect. While lower oil prices could ease inflation and benefit consumers, Petrobras’ pricing strategy and political uncertainty will determine whether those gains reach Brazilian households.

For now, the outlook remains balanced between potential relief at the pump and continued uncertainty in global energy markets.

Petrobras stands at a strategic bifurcation. On one hand, it must manage the risks of global commodity volatility and regional instability. On the other, it is investing in the science of the future and the infrastructure for cleaner fuels. Whether these moves will secure Brazil’s position as a global energy leader or leave it vulnerable to market shifts remains the defining question for the coming decade.

Petrobras (PETR3; PETR4) Bets on HVO and Renewable Diesel to Drive Brazil’s Energy Transition

Brazil’s state-controlled oil giant expands investments in green fuels, positioning HVO as a key pillar of its long-term decarbonization strategy

The global energy transition has become a central concern for governments and corporations worldwide, and Brazil is increasingly positioning itself as a relevant player in the low-carbon fuels market. At the heart of this strategy is Petrobras, which has stepped up investments in renewable diesel and Hydrotreated Vegetable Oil (HVO) as part of its broader plan to reduce emissions while maintaining compatibility with the country’s existing vehicle fleet.

Petrobras’ flagship initiative in this segment is Diesel R, a renewable diesel produced through the coprocessing of fossil diesel with vegetable oils, primarily soybean oil, widely used as cooking oil in Brazil. This new technique, called biorefining, uses advanced hydrotreating technology. The result is a fuel chemically indistinguishable from conventional S10 diesel, requiring no engine modifications and delivering significant emissions reductions.

Diesel R: Petrobras’ Drop-In Renewable Fuel That Cuts Carbon Emissions Without Engine Modifications

Diesel R, a renewable diesel developed by Petrobras, represents a practical step forward in Brazil’s energy transition. The main message is that the fuel significantly reduces carbon emissions compared to conventional fossil diesel, while still being fully compatible with existing diesel engines, meaning no mechanical adaptations are required.

Diesel R is produced by combining traditional mineral diesel with renewable vegetable oils, which undergo a refining process that removes impurities and results in a fuel that is chemically very similar to fossil diesel. Because of this similarity, drivers and fleet operators can use it in trucks and other vehicles exactly as they do today.

With Diesel R, the carbon released during combustion was previously absorbed by plants through photosynthesis, which helps lower net greenhouse gas emissions. This makes Diesel R an effective way to reduce emissions immediately, without waiting for large-scale changes in vehicle technology or infrastructure.

Overall, Diesel R is a low-carbon, drop-in solution that allows Brazil to cut emissions in the transport sector while leveraging its existing fleet and strong biofuel supply chain, reinforcing Petrobras’ role in advancing more sustainable fuels.

HVO-Compatible Fuel Without Changes to Vehicles

At Petrobras’ Cubatão refinery, renewable feedstock is blended with mineral diesel and processed in hydrotreatment units, where hydrogen removes impurities such as sulfur and oxygen. This process produces a paraffinic fuel virtually identical to fossil diesel in performance and stability.

According to Petrobras, the key advantage lies in reducing fossil fuel content without altering Brazil’s current vehicle fleet, enabling immediate decarbonization gains. The company reports that the renewable portion of Diesel R can cut lifecycle greenhouse gas emissions by up to 87% compared to traditional diesel.

Petrobras technicians explain that almost Ten percent of this fuel comes directly from vegetable oil, because the carbon released during combustion was previously absorbed by plants through photosynthesis. Therefore, the fuel operates in a near-closed carbon cycle.

Diesel R Is Not Biodiesel

Despite sharing a renewable origin, Diesel R and HVO differ fundamentally from conventional biodiesel (FAME). While biodiesel is produced through transesterification, HVO and renewable diesel undergo hydrotreatment, resulting in a cleaner, more stable fuel with superior oxidation resistance and cold-flow performance.

This chemical similarity to fossil diesel makes HVO particularly attractive to automakers and heavy transport operators. Global manufacturers such as Volvo, Scania, MAN and Mercedes-Benz already approve the use of HVO 100, reinforcing its role as a drop-in solution for decarbonizing logistics and industry.

Corporate Demand and Voluntary Climate Targets

Petrobras’ initial commercial focus is on large corporate consumers seeking to reduce their carbon footprint and meet voluntary ESG commitments. Early adopters report that the additional cost of renewable diesel is modest compared to the environmental benefits.

One industrial client estimates emissions reductions of around 400 tons of CO₂ per year, calling the cost-benefit ratio “fully satisfactory.”

Scaling Up: From 10% Renewable Content to 100% Biofuels

Currently, Petrobras produces renewable diesel with up to 10% renewable content, with plans to reach 20% in the coming years. Looking further ahead, the company is preparing for a future in which fuels could be 100% renewable from 2030 onward.

Central to this vision is Petrobras’ investment in Brazil’s first fully renewable biorefinery, located in Rio Grande do Sul. The project involves converting the Refinaria Riograndense (RPR) into a facility capable of processing 100% renewable feedstock by 2028. The biorefinery is expected to produce HVO (green diesel), sustainable aviation fuel (SAF), green naphtha and other bioproducts, strengthening Brazil’s bioeconomy.

“This project is already underway and represents a strategic priority for Petrobras over the next decade,” the company states.

Brazil’s Biofuel Advantage and Market Outlook

Brazil has a long-standing tradition in biofuels, supported by public policies such as RenovaBio, which allows renewable diesel producers to generate and trade CBIO carbon credits. Each CBIO corresponds to one ton of avoided CO₂ emissions, traded on Brazil’s B3 stock exchange.

According to studies by the Energy Research Office (EPE), renewable diesel, particularly HVO, is already one of the fastest-growing biofuels globally. Between 2011 and 2018, HVO production expanded at an annual rate of over 37%, far outpacing traditional biodiesel growth in Europe.

Once produced at scale, Brazilian HVO has strong potential to compete in international markets, especially as regulations tighten emissions standards in Europe and other regions.

Challenges Remain, but Direction Is Clear

Despite its advantages, HVO production requires complex refinery infrastructure, high-pressure hydrogenation units and significant hydrogen supply, still largely derived from natural gas. The availability and cost of sustainable feedstocks also remain key challenges.

Even so, Petrobras sees renewable diesel and HVO as essential to staying relevant in a decarbonizing global energy market.

By investing simultaneously in oil exploration and next-generation fuels, Petrobras aims to balance energy security with climate commitments, driving Brazil toward a greener, more competitive and more resilient energy future.

How Petrobras' (PETR3; PETR4) bet on pre-salt oil transformed Brazil into a major oil power

Brazil’s rise as a global oil powerhouse is rooted in one of the boldest industrial bets in its history. When the first exploratory wells in the pre-salt layer were proposed, the cost, depth, and geological challenges were so extreme that private partners walked away. Shell, then a partner of Petrobras, refused to drill, fearing the R$1 billion price tag per well and the uncertain chance of finding commercially viable oil nearly seven kilometers below the seabed.

But Petrobras, as a state-controlled company, made a different calculation: if the attempt failed, it would survive; if it succeeded, it could rewrite Brazil’s economic trajectory. That strategic risk set the stage for one of the most significant energy discoveries of the 21st century.

What Is the Pre-Salt Layer?

Geologically, the “pre-salt” refers to oil-bearing rock formations that were created before massive deposits of salt covered the region millions of years ago. Along Brazil’s southeastern coast, especially in the Campos and Santos Basins — the Santos and Campos Basins are large sedimentary basins located on the southeastern coast of Brazil, on the continental shelf, with the Campos Basin further north (coast of Rio de Janeiro and Espírito Santo) and the Santos Basin further south (coast of Rio de Janeiro, São Paulo, Paraná and Santa Catarina) —, layers of microorganisms formed rocky structures known as stromatolites, which over time became reservoirs of oil. Later, shifts in the Earth’s oceans left behind thick salt formations that buried these reservoirs under up to 7 kilometers of water, rock, and salt.

This salt layer acts like a geological curtain: homogeneous and dense, it blocks seismic waves and makes traditional imaging almost impossible. For decades, companies explored only the shallower “post-salt” layers.

The Breakthrough: Imaging Below the Salt

The turning point came when Petrobras geophysicists developed a proprietary data-analysis technique, enhanced by artificial intelligence, capable of amplifying the faint seismic signals that passed through the salt. This allowed them to identify oil-rich zones beneath the thick geological barrier.

The discovery was considered so strategic that strict security protocols were imposed. Even geological samples (“cores”) were handled under near-military secrecy inside Petrobras’ headquarters, given their potential impact on financial markets and national policy.

The Next Challenge: Drilling Through Salt

Finding oil was only the first obstacle. Drilling into the pre-salt presented another enormous challenge: unlike typical rock layers, salt is plastic. When a drill penetrates it, the walls of the well can collapse as the salt shifts and closes in.

To overcome this, Petrobras engineers spent years developing new drilling and cementing techniques, capable of stabilizing wells while drilling. This innovation drastically reduced costs and made large-scale extraction viable.

From Improbable Discovery to Economic Engine

Today, the pre-salt fields account for more than half of Brazil’s total oil production, generating tens of billions of dollars in tax revenue and foreign currency inflows. The reserves discovered in these deep layers rival those of major global producers, earning Brazil comparisons to a “South American Saudi Arabia.”

What began as a high-risk geological hypothesis became a technological triumph, and a central pillar of Brazil’s economic landscape.

Petrobras (PETR3; PETR4) and Shell Win $1.7 Billion Pre-Salt Auction for Mero and Atapu Fields in Brazil

The consortium formed by Petrobras (PETR3; PETR4) and Shell emerged victorious in the Auction of Uncontracted Areas held by Pré-Sal Petróleo S.A. (PPSA) on Thursday, December 4th, securing the Union's stakes in the giant Mero and Atapu fields in the Santos Basin. The strategic move, which reinforces Petrobras's portfolio and expands its reserves in high-return areas, involved a total outlay of approximately R$ 8.8 billion (Brazilian Reais). The amount came in below the federal government’s expectation of R$ 10.2 billion, as no offer was made for the Tupi field. According to PPSA president Luís Fernando Paroli, the government will not incur losses from the absence of bids, since it will continue receiving and selling the oil corresponding to its share in the area.

The acquisition reaffirms Petrobras's commitment to deep and ultra-deep water investments, particularly in the Pre-Salt, which is currently the company's main cash generator. By acquiring stakes in mature, highly productive fields, the state-owned company aims to mitigate risks and enhance financial predictability amidst global energy market uncertainties.

Auction Details and Financials

The consortium submitted proposals significantly above the minimum required value. For the Union's 3.5% stake in the Mero field, the group offered R$ 7.791 billion, representing a premium of 1.90%. In the Atapu field, the 0.95% stake was secured for R$ 1 billion, an expressive premium of 16%.

Paroli hailed the result as historic, noting that the Union's total revenue from the state-owned company could reach R$ 30 billion in 2025, surpassing all previous years combined.

Market Optimism and Strategic Impact

The market reacted with optimism to the news. Petrobras shares (PETR4) were already trading higher before the official confirmation, reflecting investor confidence in the company's strategy to expand reserves and future cash flow. The operation is seen as strengthening three core pillars for Petrobras's performance:

1. Expanded Reserves: Mero and Atapu are among the world's most productive fields;
2. Greater Cash Generation: Assets already discovered and in operation reduce risks and increase economic efficiency;
3. Sustained Dividends: Increased financial flow supports the continuation of robust dividend policies.

For shareholders, the move is expected to strengthen the company's fundamentals, improve the potential for stock appreciation, and support long-term dividend continuity. The lot related to the Tupi area did not receive offers, but PPSA clarified that this does not cause prejudice, as the Union's production in the region will continue to be commercialized normally.

 

New Oil Discovery in Campos Basin Boosts Petrobras’ (PETR3; PETR4) 2025 Exploration Record

Petrobras revealed a new oil discovery this week in the Campos Basin, off the coast of Rio de Janeiro, reinforcing momentum in what has become one of its strongest exploration cycles in years. The find, located 108 kilometers from the coast in the southwestern portion of the Tartaruga Verde field, sits in the post-salt layer at a relatively shallow depth of 734 meters, conditions the company says will help reduce extraction costs.

This marks Petrobras’ third oil discovery of 2025, following earlier announcements in February and May in the prolific Santos Basin. Unlike those pre-salt finds, located nearly 2,000 meters underwater, the latest discovery is in a more accessible geological layer.

According to sources familiar with the project, Petrobras plans to accelerate development by leveraging existing platforms and infrastructure. A dedicated working group will design the production strategy, which is expected to rely on pipeline connections to nearby facilities with available processing capacity.

The new discovery fits perfectly with Petrobras' main plan to restore the Campos Basin which used to lead Brazil's oil production but currently produces only around 20% of the country's total output. According to analysts production levels have the potential to increase from 820000 barrels per day to reach 1 million barrels per day. 

The announcement comes as production levels reach their highest point. In the third quarter of 2025, Petrobras’ operated output reached 4.5 million barrels of oil equivalent per day, with the company itself producing 3.1 million barrels, a significant increase compared to the same period in 2024. 

The company plans to increase its exploration activities on the Equatorial Margin which scientists estimate contains 30 billion barrels of oil that exceed Petrobras' current reserves by almost three times. 

The company directs large financial resources toward maintaining its fast exploration and production growth. The third quarter saw CAPEX reach its highest level at US$5.5 billion which represents a 28.6% increase in total investments from the previous year.

The company has achieved strong performance results which provide benefits to its shareholders. 

Petrobras distributed more than R$ 32 billion in dividends across the first three quarters of 2025 and is projected to deliver an annual dividend yield above 9% at current share prices. 

Through recent discoveries and increased production efforts and substantial funding dedicated to unexplored areas Petrobras continues to strengthen its position as a top-performing global oil producer.