SASOL rallied to a five-year high yesterday, boosting the JSE all share index to a one-week high, as the global price of Brent crude oil surged to $120 (R1 860) a barrel again as fear of shortages persisted.
This despite Saudi Arabia sharply raising prices for its crude sales for next month, highlighting tight global supplies even after OPEC+ countries agreed to accelerate output increases in July and August.
Saudi Arabia yesterday raised the official selling price for its flagship Arab light crude bound for its main Asian market and to northwest Europe, while holding the premium steady for barrels going to the US.
This followed sharp moves last week when OPEC+ decided to increase output in July and August by 648 000 barrels per day, or 50 percent more than previously planned.
However, markets continued to doubt the group’s ability to meet demand as several OPEC+ member countries struggle to boost output, at a time when demand is soaring in the US amid peak driving season and as China eases Covid-19 lockdowns.
Sasol thus saw its share price rising by 4.6 percent to R436.67 per share on rising oil prices, before shaving gains and closing at R429 per share.
The South African petrochemical group’s gains also lifted the domestic markets to a near one-week high.
The JSE All Share Index traded slightly above the 71 400 points level during early trade, the highest since May 31 and driven by commodity-linked stocks, with market sentiment boosted by optimism around easing lockdowns in China and news that the US aims to further reduce tariffs on Chinese imports.
The all share index closed up 0.28 percent higher at 71120 points.
Rand Swiss portfolio manager Gary Booysens said the tone in the market haf been "optimistic" about China reopening some of its manufacturing regions.
Booysens said that the reopening of China and the failure of OPEC+ to meet their output targets, plus the European Union's ongoing sanctions against Russia, had allowed Brent crude prices to shoot back to $120 per barrel.
"What we have is an indication that the market is opening up," Booysens said.
But the high global oil price means that South African fuel prices could remain at historic highs for a few more months.
South Africa saw a record increase in the petrol price last week; even with the government temporarily cutting the fuel levy by R1.50 a litre, the petrol price still jumped by R2.33 to R24 a litre.
Old Mutual Wealth investment strategist Izak Odendaal said the pain at the pumps would remain.
"While oil prices have a global macro-economic impact, it is also important to remember that the petrol price probably plays a bigger-than-warranted role in the popular imagination," Odendaal said.
It is a very visible price and one we pay often. It is also a price that evokes the idea of individuals facing powerful malignant forces: warlords, geopolitical schemers, environment-destroying corporations, greedy traders, tax-hungry governments and so on.
"But it is best to not overreact to such feelings, especially not when it comes to your portfolio. People will also be surprised how much fuel you can save when you really try."
Meanwhile, the rand clawed back some of its recent losses against the dollar, strengthening to R15.38 against the greenback, but the price of oil in rands remained close to record highs.
Investec chief economist Annabel Bishop said the rand’s purchasing power parity value against the US dollar was closer to R10 to the dollar than R15; however, R15 to the dollar was a key resistance level, which will likely prove hard to sustainably breach.
"The rand has strengthened in June, after May’s sharp run weaker, with the domestic currency at R15.31/USD today, from an average of R15.89/USD over May, and a high of R16.37/USD. Global financial markets subsequently saw risk aversion lessen from mid-May onwards," Bishop said.
"The domestic currency has also gained on China’s reopening as its Covid-19 cases decline, further assisting in causing market fears of recession to recede, with the world’s second-largest economy freeing up restrictions on economic activity."
BUSINESS REPORT