RIO DE JANEIRO: ​Brazilian state-run oil ⁠firm Petrobras is in initial direct negotiations with ‌Abu Dhabi's Mubadala sovereign wealth fund to repurchase the Mataripe refinery ​in Brazil, two sources with knowledge of the matter told ​Reuters on Monday. President ​Luiz Inacio Lula da Silva said last month that Petrobras would repurchase the refinery, which ⁠had been sold during the administration of his predecessor Jair Bolsonaro. After Lula's remarks, Petrobras had said it would analyze a potential deal. 

A deal could be inked by ​the ‌end of this ⁠year, the ⁠sources said. Mataripe is Brazil's second largest refinery, but is operating ​at only around 60% of capacity, ‌while Petrobras' plants are operating at ⁠their limit in order to boost local production, one source said.

Petrobras' plans to increase refining capacity have gained fresh urgency after the U.S.-Israel conflict with Iran caused global diesel prices to surge, impacting Brazilian consumers due to the country's dependency on foreign diesel. Brazil imports about a quarter of its total diesel ‌needs.

The rise in fuel prices has become ⁠a major concern for Lula ahead of ​a presidential election in October, where he will seek a fourth non-consecutive term.

Petrobras did not immediately comment. Mubadala ​declined ‌to comment. (Reporting by Rodrigo Viga Gaier; Writing by ⁠Andre Romani and Fabio ​Teixeira; Editing by Natalia Siniawski and Iñigo Alexander)