SAO PAULO, Nov 2 (Reuters) - Brazilian President Dilma Rousseff is yet to decide whether to allow state-run oil company Petróleo Brasileiro SA to raise domestic fuel prices by using a formula, her office said on Saturday in response to a newspaper article saying a price hike may be in the works.

Newspaper O Estado de S. Paulo, which cited an unidentified presidential aide as the source, reported that Rousseff had endorsed a plan tying domestic fuel prices to a series of factors, and signed off on "two or three" annual price increases to ensure that the company, commonly known as Petrobras, has a predictable business plan for the years ahead.

In a statement, the president's office said reports that Rousseff has discussed the matter were "baseless," adding that she "has yet to issue an opinion on the subject."

"In fact, no document discussing the issue has yet reached the office of the president. Therefore, it is speculative for any report to say there is definition on the matter," the statement added.

Petrobras said this week that its new policy to set domestic diesel and gasoline prices will automatically trigger adjustments based on international prices, exchange rates and other factors. The methodology will not allow full pass-through of volatility of international oil prices, Petrobras said.

Calls to media officials at the mining and energy ministry in Brasilia and Petrobras in Rio de Janeiro were not immediately answered.

The new formula, once it is in place, will help Petrobras smooth out short-term gaps between international and domestic fuel prices that have triggered more than $10 billion in losses at its refining division over the last couple of years.

The plan is expected to help Petrobras, ranked by some analysts as the world's most indebted company, to cut debt that has ballooned because of a government-mandated policy that the company sell imported fuel at a loss to keep local prices low.