Petrobras (PBR)

Trend Information

Crude oil prices

International oil prices increased at a record rate in 2004. The main factors driving this price increase include:

116

Table of Contents

Although our oil prices are influenced by international oil prices, the price we charge for oil is generally lower than international prices. The main reasons for such spread relate to the fact that the oil we produce is heavier, which requires more refining expenses, and there is less refining capacity available capable of processing our heavy oil. This spread increased in 2004.

Oil products prices

The prices for fuel oil did not grow as much as other oil products. With the increase in demand for oil products, refineries used more heavy oil that produces more residues, including fuel oil, than light oil. Because the demand was concentrated on light and medium oil products, there was an excess supply of fuel oil. This generated an increase in the price difference between heavy and light petroleum.

Refining

The use of substantially all available refining capacity in 2004 resulted in a year of record profit margins for the refining industry.

We expect that several of the structural factors contributing to growth in demand in 2004 will continue to influence the market. As a result, we believe that the trends described above will continue in the next few years.

For a description of other trends that might affect our financial condition and results of operation, see Item 4. “Information on the Company—Competition.”