Brent crude, the international oil benchmark, rose 6.3% on Thursday and closed at $107.63 a barrel, after trading above $108 during the session. According to g1, it is the highest level since May. The barrel has gained more than 49% since early July, when it traded below $72, and Valor Investe puts the rally at 77% for the year.
The trigger on Thursday was the seizure of Mokha, a port city in southwestern Yemen, by the Houthi movement, an ally of Iran. The area serves as an alternative route for Saudi oil shipments, and O Globo notes that Saudi Arabia had been expanding exports through the Red Sea after the war with Iran. The conflict between the United States and Iran had already disrupted traffic through the Strait of Hormuz, one of the world's main oil routes, and the loss of another export point deepened fears of a drop in global supply. The paper also notes the barrel had not closed this high since May, shortly before a regional truce and the signing in June of a protocol of agreement between Iran and the United States to end the war.
Pressure on the United States
Oil at $107 pushed investors away from risk in the world's main markets, O Globo reports. Brazil moved the other way: the commercial dollar fell to R$ 5.10 and the Ibovespa index closed up 1.42%, on a day driven by the election calendar. The bill worries the government of President Donald Trump. According to g1, costlier oil pressures inflation and interest rates in the United States by raising the price of fuel and goods shipped to stores, two months before the midterm elections in November. On Wednesday, Trump said oil prices will probably not fall before the vote.
Brazil cuts taxes and raises subsidies
President Luiz Inácio Lula da Silva signed a decree on Wednesday that raises the gasoline subsidy from R$ 0.44 to R$ 0.63 per liter and eliminates federal taxes on hydrous ethanol, a cut of R$ 0.19 per liter. The government also issued a provisional measure, a presidential act with the force of law pending congressional approval, authorizing a R$ 1 per liter subsidy for diesel. It adds to an existing R$ 1.12 subsidy valid until September 26; during that period, the total reaches R$ 2.12 per liter.
Petrobras, the state-controlled oil company, said it will stop applying a R$ 0.44 per liter discount on pure gasoline A, the version refineries sell to distributors before it is blended with ethanol. The average price of gasoline A to distributors moves to R$ 3.05 per liter and, according to the company, the net reduction at the pump will be R$ 0.19 per liter.
The backdrop is in the weekly survey by the National Agency for Petroleum, Natural Gas and Biofuels (ANP, the Brazilian fuel regulator): between August 30 and September 5, gasoline averaged R$ 6.51 per liter at pumps across Brazil, S-10 diesel R$ 6.88 and hydrous ethanol R$ 3.95. The tax cuts should ease prices at the pump, but lasting relief depends on a truce that, in Trump's own assessment, is unlikely before November.