PETROCHEMICAL giant Sasol yesterday surged 8.4 percent to touch R400 per share on the JSE for the first time in three years after the global oil price shot to an eight-year high due to ongoing fears of supply constraints.
The share later closed 7.53 percent higher at R396.93.
The group has been struggling to rise to its former glory days after global oil prices plunged more than 30 percent in 2020.
However, the invasion of Ukraine by Russia has been a black swan in global markets, leading to commodity prices – including oil, coal and gold – shooting up amid rising demand and risk off sentiment by investors in a spooked market.
The price of Brent crude oil jumped to $113 (R1 737) a barrel yesterday, the highest in eight years, as the worsening crisis in Ukraine and sanctions against Russia stoked fears of further supply disruptions.
Absa Asset Management portfolio manager Carmen Mpelwane said investors had been clambering to commodities due to the risk-off environment and that Sasol was a huge beneficiary of a higher oil price.
“In a risk-off environment as we have seen, Sasol has been one of the key beneficiaries for this and that is largely driven by an increase in the heightened oil price,” Mpelwane said.
“So as long as we remain of the view that the oil reserves will be under pressure, then we are likely to see Sasol supported in terms of this.
“Also, commodity prices appear to be elevated but if the current situation remains, specifically if the sanctions continue to be ramped up against Russia, that is one of the key issues to look at.”
Russian oil exports represent about 8 percent of the total global output and its likely withdrawal from the international market will exacerbate the current scenario of demand exceeding supply.
This was worsened by the Opec+ alliance of major producers that includes Russia, which yesterday stated that it would be sticking to a planned output increase of 400 000 barrels a day in April.
Exinity Group chief market analyst Han Tan said the Ukraine crisis was only solidifying oil bulls’ resolve in pushing prices higher.
“Even without the war, and the accompanying threats to strangle Russian oil exports, the oil market structure was pointing to tightening conditions,” Tan said.
“Global oil inventories have been falling as supply fails to keep pace with the recovery in demand.”
Oil demand growth is expected at 4.2 million barrels per day in 2022 as lockdowns and other restrictions are easing in most countries.
In September 2021, PSG Wealth predicted that Sasol was in a better position to deliver a R400 share price given the recovery in the oil price environment on reopening of economies.
Sasol traded at its lowest at R21 per share due to falling demand at the height of Covid-19 pandemic.
At some point, Sasol’s share price also suffered its biggest one-day drop in nearly three years due to delays and cost increase at its costly Lake Charles Chemicals Project in the US.
Sasol’s good fortunes in the markets also boosted stocks as the JSE jumped to another all-time high for the second consecutive day yesterday.
The JSE All Share Index climbed 0.8 percent to 77 728 index points in the afternoon, buoyed by broad-based gains in mining and resources sector stocks. It later closed at 77536 points.
Gold prices remained close to a 13-month high at $1 932 per ounce on fears that the conflict could escalate further.
Coal prices also broke an all-time record high at $400 per ton and were now up more than 100 percent since the beginning of 2022, as mounting sanctions on Russia led to an international energy crunch.
Germany is poised to create coal reserves for electricity power plant operators, while Italy announced it could reopen some shuttered coal plants.
BUSINESS REPORT ONLINE