(Bloomberg) -- Petroleo Brasileiro SA slumped following a report that President Jair Bolsonaro has decided to oust the chief executive officer at the state-owned oil producer.
Preferred shares of Petrobras fell as much as 4.1%, hitting session lows on Monday after Veja magazine said Bolsonaro decided to remove Joaquim Silva e Luna from the post, citing a source it didn't identify.
Three people familiar with the matter confirmed the decision to Bloomberg News, asking not to be named because discussions are private. Some of Bolsonaro's allies are still trying to save Luna's job, one of the people added.
If confirmed, the move would put an end to weeks of speculation as the company's fuel price policy stirred anger from heads of congress, Bolsonaro and his main opponent in the October election, Luiz Inacio Lula da Silva, all of whom have criticized Petrobras for charging high prices for the fuel it sells.
Read More: Petrobras Hit by Fuel Politics With Subsidies Surging All Over
Luna, who has only been in the role for about a year, announced a hike in prices for both diesel and gasoline on March 10. Until then, Petrobras held prices stable for 57 days even as oil was trading well above $100 a barrel after Russia invaded Ukraine. While Bolsonaro railed against the decision to lift prices, Petrobras defended the move on social media, citing concerns that there could be supply shortages because the company isn't Brazil's only importer.
If Luna winds up exiting, the incoming chief executive will need to navigate domestic politics where fuel prices are a major campaign topic in an election year.
“It's hard to imagine that a replacement will have the autonomy that Silva e Luna has,” said Leonardo Rufino, a Rio de Janeiro-based portfolio manager at Pacifico Gestao de Recursos. “It isn't a complete surprise, but the news is clearly negative.”
When Bolsonaro selected Luna, a general with no previous experience in oil who was considered close to the president, it caused concern that the state-controlled company would start spending billions of dollars subsidizing fuel like it did during the 2011-2014 oil boom. Shares plummeted and analysts rushed to slap sell ratings on the stock. Instead, Luna stuck with his predecessor's focus on profits and debt reduction, and even kept most of the existing management team in place.
Read More: Lula's Cheap Fuel Pledge Threatens Petrobras's Dividend Windfall
Petrobras slashed its debt enough to resume regular dividend payments last year under Luna and he largely stuck with Petrobras's policy of tracking international fuel prices, which won praise from investors.
Luna is an engineer by training who rose to the rank of four-star general and managed several national projects, including the construction of a mega-highway through the Amazon that began in the 1980s and took two decades to complete. He also ran the Itaipu hydroelectric dam during the Bolsonaro administration.
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