(Bloomberg) -- Petroleo Brasileiro SA shares are on track for their best day since August 2021 after former leftist President Luiz Inacio Lula da Silva failed to win in the first round of Brazil’s election, potentially pushing him to take a more moderate stance.

Preferred shares gained as much as 9.5% in Sao Paulo Monday, the main contributor to a rally in the Ibovespa index, after the closer-than-expected election results combined with a rally in oil prices, with Brent crude up over 4%.

While President Jair Bolsonaro has pledged to move forward with his privatization program should he win the election, Lula has been more vocal about using state-run companies to help shore up Latin America’s largest economy, even if it comes at the expense of shareholders. Lula may now need to become more centrist to shore up support ahead of the second round of voting on Oct. 30.

“The tighter-than-expected margin leaves the door open for Bolsonaro to turn things around,” Banco BTG Pactual SA analysts led by Carlos Sequeira wrote in a note. But “maybe more importantly, it could force Lula to move even further to the center and clarify his economic agenda.”

Lula Has Big Petrobras Plans That Would Undo Privatization Push

Lula and his advisers have called for reinvigorating Petrobras as a state-controlled enterprise, with additional investments in refining, renewable energy and an international expansion. It would unwind nearly a decade of cost cuts and a narrow focus on Petrobras’s most profitable fields in deep waters, which has allowed the company to slash debt and boost profits and dividends.

What Bloomberg Intelligence Says

Initial results in Brazil’s general elections may ease concerns over government intervention in Petrobras. Though the presidential race is still undecided, the Senate and Congress swung decisively to the right, which is perceived to favor less involvement in state-owned enterprises. That will limit the impact of executive decisions on those companies.

-- Fernando Valle, BI energy analyst

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(Adds Bloomberg Intelligence commentary after the fifth paragraph.)

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