Brazil will raise the required amount of ethanol blended into gasoline to 25 percent from the current 20 percent by the end of June next year, the country's oil regulator said on Wednesday.
Brazil had lowered the amount of ethanol in gasoline to 20 percent in October 2011 due to a shortage of the biofuel and an increase in its price.
But the scenario is improving for the sugarcane industry, which provides the raw material for Brazil's ethanol and should now be able to meet the higher demand, said Allan Kardec, director of the ANP regulator.
"The increase has already been agreed to," Kardec said on Tuesday at an event in Rio de Janeiro, according to Brazilian news agency Agencia Estado. "It will occur in May or June of next year."
ANP's communications office confirmed the veracity of Kardec's comments on Wednesday.
The government and ethanol industry have been in negotiations for several months to determine whether there will be enough biofuel on the market to raise the blend requirement without pressuring fuel prices or spurring inflation.
The ANP has the final say in the decision.
Brazilian state-led oil company Petrobras supports increasing the amount of ethanol used in fuel because it would be able to reduce the volume of gasoline that it imports at a loss to sell in the domestic market.