Lula's move could be a mistake, as former CEO Jean Paul Prates was seen effective in balancing market demands for disciplined capital spending and healthy dividends with political demands to stabilize fuel prices and invest in employment-generation sectors.

Brazil's Petrobras shares plunged 8% as markets opened today, following an announcement that its chief executive officer would resign and be replaced by a former regulator close to President Luiz Inácio Lula da Silva.

Industry analysts expressed concern as exiting CEO Jean Paul Prates was seen effective in balancing market demands for disciplined capital spending and healthy dividends with political demands to stabilize fuel prices and invest in revenue- and employment-generating sectors. 

"It was unnecessary, because Jean Paul Prates was doing a very reasonable job," said Frederico Nobre, chief equity analyst at Warren Investimentos.

Prates lasted less than a year and a half in the job —the fourth Petrobras CEO fired in roughly as many years for political reasons. His dismissal raises new fears that Petrobras will be used as a tool to boost the Brazilian economy at the expense of minority shareholders.

In a note to clients downgrading Petrobras' rating from "buy" to "hold", Jefferies' analysts said the CEO change "appears to be an escalation of the push to intervene in the company."

Prates' exit represents a victory for members of Lula's cabinet who are pushing for lower fuel prices, lower dividends and more capital spending to create jobs and boost the economy.

In his place, the government appointed Magda Chambriard, former head of Brazil's oil and gas regulator, ANP, during Lula's previous Workers' Party administration.

After Lula was elected in 2022, Chambriard was considered for the CEO position of Petrobras, and in an interview she echoed many of Lula's views on how the company should be run, pledging for lower dividends for shareholders to free up cash for investments.