Bearish Bets on Petrobras ADRs Hold Near Record Before Earnings

Bets on further declines for Petroleo Brasileiro SA held near a record high before the oil producer’s long-delayed audited results.

Short interest in its American depositary receipts was at 16 percent of shares outstanding as of Tuesday, according to data compiled by London-based Markit and Bloomberg. Bearish wagers jumped to an all-time high of 16.2 percent Monday, four times the amount they represented when the company first delayed results in November amid Brazil’s largest-ever corruption probe.

Petrobras plans to release its third-quarter and 2014 results after markets close Wednesday, ending a five-month wait for investors. Shares of the state-run company plunged to the lowest since 2003 in January as it continued to postpone releasing earnings while trying to account for corruption-related losses. The shares have since climbed 57 percent amid a management change and reports of asset sales, paring losses since November to 5.7 percent.

“Petrobras has climbed a lot lately, and you get to a point where it’s too much faith to hope it will rise much more,” Ari Santos, an equity trading manager at H. Commcor in Sao Paulo, said by phone. “Investors might take profits after the release, because then we’ll get back to all the other issues the company has.”

Petrobras is cutting investments and reviewing production targets as it faces lower crude prices, a weaker currency that’s boosting debt costs and a supply chain in disarray after the company halted new contracts with more than 20 contractors cited in the corruption investigation.

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