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Petróleo Brasileiro S.A. - Petrobras PBR is about to face a two-day warning strike announced by Brazil's national oil workers' federation, also known as FUP. The strike, tentatively scheduled for May 29 and 30, is a response to stalled negotiations over variable compensation and what union leaders are calling “incoherent” cost-cutting measures.
The announcement follows Petrobras' recent pledge to implement austerity steps in light of declining Brent crude oil prices. The company stated earlier this week that falling global prices would necessitate tighter financial controls and cost reductions across the board.
PBR’s Cost-Cutting Decision Amid Low Oil Prices
Petrobras decided to revise its five-year strategic plan amid declining Brent crude prices, signaling a shift toward austerity. The company, during its first-quarter earnings call, highlighted that Brent prices near $65 per barrel necessitate project simplification and tighter spending while preserving key investments.
This approach contrasts with the previous expansionary strategy encouraged by the company, which sought increased investment to boost jobs and the economy. Now, cost-cutting takes precedence, though the 2025 capital expenditure remains unchanged. Petrobras announced that it will explore all cost-reduction avenues before scaling back investments, focusing on simpler projects and those with quicker cash returns.
Rising Tensions Over Pay and Policy
At the heart of the dispute is Petrobras' variable compensation plan — a key point of contention for the oil workers’ union. The union argues that the company’s cost-cutting approach undermines employee morale and contradicts prior commitments.
FUP, representing a significant portion of Petrobras’ workforce, claims that management has shown little progress in negotiations, prompting the strike decision. While the strike still requires final approval from union members, the move reflects growing unease over the direction of company policies.
Petrobras Responds
Petrobras has acknowledged the union's announcement, stating it had not yet received an official notification of the strike. The company emphasized that it respects the workers' right to protest but has not commented further on the negotiations or austerity measures.
PBR’s Zacks Rank and Key Picks
Headquartered in Rio de Janeiro, Petroleo Brasileiro S.A., or Petrobras S.A., is the largest integrated energy firm in Brazil and one of the largest in Latin America. Currently, PBR has a Zacks Rank #5 (Strong Sell).