Brazilian Oil Workers' Strike Gains Steam in Another Blow to Government

Rio De Janeiro/Sao Paulo: A 72-hour strike by Brazilian oil workers halted refineries and rigs on Wednesday, union leaders said, a new blow to President Michel Temer on the heels of a trucker protest that has strangled Latin America's largest economy for over a week.

The strike by workers demanding changes at state-led oil firm Petroleo Brasileiro SA is the latest challenge for the company known as Petrobras, whose shares have tumbled nearly 30% in two weeks over fears that political interference would unwind recent investor-focused policies.

The economic and political storm has shaken the lame duck Temer government ahead of October elections and rattled nerves about the path forward for Petrobras, Latin America's biggest oil producer. It has also raised the spectre of protests spreading to more sectors as Brazilians vent frustration with the unpopular government and an uneven economic recovery.

With truckers protesting over high diesel prices, government sources told Reuters on Tuesday that Temer had been considering scrapping a market-based fuel pricing policy at Petrobras. But by Wednesday morning the president's office issued a statement saying he would preserve the policy.

The oil sector strike included workers on at least 25 of the 46 oil rigs Petrobras operates in the lucrative Campos basin, responsible for nearly half of Brazil's petroleum production. FUP, Brazil's largest oil workers' union, said that seven of those rigs were paralysed. Petrobras did not respond to requests for confirmation.

Petrobras said before the strike that the disruptions would not have an immediate major impact on its output or overall operations. Brazil produces about 2.1 million barrels of oil per day.

According to a source close to the company, Petrobras has a significant stock of fuel on hand, especially as the ten-day trucker protest prevented significant amounts of fuel from leaving refineries.

The truckers' roadblocks and resulting fuel shortages have halted major industries and hammered exports of everything from beef and soybeans to coffee and cars.

Steelmaker Cia Siderúrgica Nacional SA, Brazil's second-largest iron ore exporter, declared force majeure for its mining products due to disrupted supplies of diesel, explosives and food to it mines.

The ten-day trucker protest left major cities running short on food, gasoline and medical supplies, and officials warned it would take days to restore supply lines.

The automakers industry lobby Anfavea said car assembly plants halted since Friday will start up again on Monday.

Public security minister Raul Jungmann said the numbers of roadblocks that exceeded 1,000 at the height of the strike had fallen to under 200 by Wednesday night.

"Brazil is returning to normal," he said at a news conference where he accused owners of transport companies of taking part in what he called a "lockout." The companies have been slapped with 272 million reais ($73 million) in fines.

Moody's Investor Service warned that it will take weeks for operations to return to normal in sectors from meatpackers and automakers to airlines and retail.

Oil workers target Parente

FUP union said workers did not show up to work on Wednesday at ten refineries stretching from Manaus in the Amazon to Rio de Janeiro in the southeast. They also walked off the job at plants handling lubricants, nitrogen and shale gas, as well as in the ports of Suape and Paranagua.

The oil strike was declared illegal by Brazil's top labour court late Tuesday, after Petrobras argued it was about politics rather than labour issues. FUP leader Jose Maria Rangel said by phone that the union "will not be intimidated" by judicial decisions, and called the three-day strike a "warning."

"Our members have already approved us declaring a strike without a fixed end date," the union said, without providing details on when any longer stoppage may take place.

Unions representing oil workers said they were demanding the resignation of Petrobras' chief executive, Pedro Parente. They also want the end of the market-based fuel pricing policy and other changes made at Petrobras since Temer took power in 2016.

Petrobras said on Wednesday that board member José Alberto de Paula Torres Lima had resigned, citing "personal reasons." He was one of three board members recruited by an outside agency and added to the board in April in an effort to establish its independence.

Petrobras did not respond to questions about his departure.

Parente, on a Tuesday conference call with analysts, said Petrobras was taking action so that any strike would have minimal or no impact on production and operations.

The company flexed its muscles a bit by announcing on Wednesday that it would raise gasoline prices at refineries by 0.7% starting Thursday.

(Reuters)

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