Sasol’s share price rising in tandem with bullish global oil price
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SASOL'S share price continued rising strongly yesterday after a bullish global oil price had already sent the price up by 6.4 percent the previous day, TreasuryOne currency strategist Andrew Cilliers said yesterday.
The price of oil remained stable yesterday morning with Brent Crude and WTI both trading at similar levels from yesterday. Both are still in positive territory for the day quoted at $70.35 (R966.50) and $69.50, respectively.
Sasol shareholders have seen significant gains in recent months as the group's share price has risen 247.4 percent from a 52-week low reached at the end of last October. A year ago, the share price was trading at R124.75.
For longer-term shareholders, the share price is still well off the R479.45 it was trading three years ago.
Anchor Capital investment analyst Seleho Tsatsi said Sasol's share price rise lately had been driven by continued strength in oil and chemical prices.
Opec recently decided to increase demand quotas, but to do so at a gradual pace. That was well received by the market and oil prices rallied in response to a two-year high.
Sasol's earnings and valuation are very sensitive to oil and petrochemical prices, he said.
As indication of how closely Sasol's share price is correlated with world oil prices, Brent crude oil price was trading 0.56 percent higher at $70.66 per barrel, but it too had reached as low as R38.26 at about the same time that Sasol's share price hit a 12-month low. More than 65 percent of Sasol's operating profit is derived from its energy products and the rest chemicals.
On Tuesday, the Brent crude oil price traded above $71, its highest price since March.
Prices were also boosted by Chinese data showing that the country's factory activity grew at its fastest pace this year in May.
The US's Information Energy Information Administration said on its website that it expected Brent crude oil prices to average $65 per barrel (p/b) in the second quarter of 2021, $61p/b during the second half of 2021, and $61p/b in 2022.
At the end of April, Sasol, which has been under pressure from environmental organisations about its air emissions at its coal-to-liquid fuels plant and oil refinery in Secunda, said headline earnings per share were expected to improve at least 20 percent for the year to June 30, 2021, compared with the headline loss per share of R11.79 for the year ended June 30, 2020.
For the six months to December 31, 2020, Sasol reported headline earnings of R19.16 a share. Sasol's share price closed 1.71 percent higher at R241.93 on the JSE yesterday.