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Brazil oil worker strike gains steam in another blow to government

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By Marta Nogueira and Brad Brooks

RIO DE JANEIRO/SAO PAULO (Reuters) - A 72-hour strike by Brazilian oil workers halted refineries and rigs on Wednesday, union leaders said, a new blow to President Michel Temer on the heels of a trucker protest that has strangled Latin America's largest economy for over a week.

The strike by workers demanding changes at state-led oil firm Petroleo Brasileiro SA is the latest challenge for the company known as Petrobras, whose shares have tumbled nearly 30 percent in two weeks over fears that political interference would unwind recent investor-focused policies.

The economic and political storm has shaken the lame duck Temer government ahead of October elections and rattled nerves about the path forward for Petrobras, Latin America's biggest producer of crude.

It has also raised the specter of protests spreading to more sectors as Brazilians vent frustration with the unpopular government and an uneven economic recovery.

With truckers protesting over high fuel prices, government sources told Reuters late on Tuesday that Temer had been considering scrapping a market-based fuel pricing policy at Petrobras. But by Wednesday morning the president's office issued a statement saying he would preserve the policy.

The oil sector strike included workers on at least 25 of the total 46 oil rigs Petrobras operates in the lucrative Campos basin, responsible for nearly half of Brazil's petroleum production. FUP, Brazil's largest oil workers' union, said that seven of those rigs were paralysed. Petrobras did not respond to requests for confirmation.

Petrobras said before the strike that the disruptions would not have an immediate major impact on its output or overall operations. Brazil produces about 2.1 million barrels of oil per day.

According to a source close to the company, Petrobras has a significant stock of fuel on hand, especially as the 10-day trucker protest prevented significant amounts of fuel from leaving refineries.

The truckers' highway blockades and resulting fuel shortages have already halted major industries and hammered exports of everything from beef and soybeans to coffee and cars.

FUP said on Wednesday that workers did not show up to work at 10 refineries stretching from Manaus in the Amazon to Rio de Janeiro in the southeast. They also walked off the job at plants handling lubricants, nitrogen and shale gas, as well as in the ports of Suape and Paranagua.

The oil strike was declared illegal by Brazil's top labour court late Tuesday, after Petrobras argued it was about politics rather than labour issues. FUP union leader Jose Maria Rangel said by phone from Rio de Janeiro on Wednesday the union "will not be intimidated" by judicial decisions, and called the three-day strike a "warning."

"Our members have already approved us declaring a strike without a fixed end date," the union said, without providing details on when any longer stoppage may take place.


Unions representing oil workers said they were demanding the resignation of Petrobras chief executive Pedro Parente. They also want the end of the market-based fuel pricing policy and other changes made at Petrobras since Temer took power in 2016.

Petrobras said on Wednesday that board member José Alberto de Paula Torres Lima had resigned, citing "personal reasons." He was one of three board members recruited by an outside agency and added to the board in April in an effort to establish its independence.

Petrobras did not respond to questions about his departure.

FUP union leader Rangel said the Temer government and Parente's policies were delivering Petrobras up to foreign investors, while "the shipyards of Rio de Janeiro are closed" as unemployment remains near record levels.

Parente, on a Tuesday conference call with analysts, said Petrobras was taking action so that any strike would have minimal or no impact on production and operations. The company flexed its muscles a bit by announcing on Wednesday that it would raise gasoline prices at refineries by 0.7 percent starting Thursday.

The separate 10-day trucker protest against diesel price hikes has left major cities running short on food, gasoline and medical supplies, despite significantly easing on Tuesday night.

Officials warned it would take days to restore supply lines disrupted by the stoppage that at its height saw over 1,000 roadblocks on highways across the country.

Moody's Investor Service warned that it will take weeks for operations to return to normal in sectors from meatpackers and automakers to airlines and retail.

(Reporting by Marta Nogueira and Brad Brooks; Additional reporting by Gram Slattery in Sao Paulo and Alexandra Alper in Rio de Janeiro; Editing by Brad Haynes and Rosalba O'Brien)