PBR Petroleo Brasileiro ADR

RIO DE JANEIRO—Brazilian state-run oil company Petró leo Brasileiro SA said Tuesday it has decided to reduce prices for gasoline and diesel, after more than a year of using its near-monopoly in the domestic fuel market to shore up its cash flows.

Petrobras' board decided to reduce the price of diesel and gasoline sold at its Brazilian refineries by 10.4% and 3.1%, respectively, the company said in a press release, adding that the price cuts reflect a drop in international oil prices in recent weeks.

Petrobras burned billions of dollars in cash from 2011 to 2014 by subsidizing fuel prices in the domestic market. Now burdened with the global oil industry's largest pile of debt, the company since last year has sold gasoline and diesel at a hefty markup.

But Petrobras executives fear that doing so for too long could threaten the company's dominant market share in Brazil by encouraging other firms to import fuels.

"The combination of falling prices for oil and derivatives…and the reduction in the company's share of sales to the domestic market have impacts on the capacity utilization of Petrobras' assets, particularly in refining, on inventory levels and also on import and export flows," the company said in the press release. "These variables justified a larger correction in prices.

Write to Paul Kiernan at paul.kiernan@wsj.com

(END) Dow Jones Newswires

November 08, 2016 19:35 ET (00:35 GMT)

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