With my feed on X filled with news of war (and endless AI-written posts providing “analysis” on the situation), life remains pretty good at the tip of Africa. We thankfully tend to be far away from most of the geopolitical upheaval. I’ll stop there, for fear of tempting fate.
But we still aren’t immune to the macroeconomic impacts. For example, if the developments in Iran give the oil price a further boost and reward the long-suffering oil bulls, that would be good news for Sasol. And as it happens, Sasol released interim results in the past week that show the extent of internal improvements the company has made.
Does Sasol find itself in the right position at the right time? Is the sun going to shine on Sasol punters once more? Or will the conflict fizzle out, leaving investors exposed to a potential correction in the Sasol share price as expectations of a higher oil price wash away?
There’s no way of knowing, but we can at least consider the possibilities.
Sasol’s share price has shown interesting behaviour in the past year. It’s up 77% over 12 months, yet interim headline earnings for the six months to December fell by a nasty 34%. The market is clearly far more interested in the prospects of the company than its current reality. This isn’t an unusual approach by investors, but the extent of deviation between the share price and the earnings is much higher than you’d usually see.
A major underlying driver of the bullishness has been the destoning plant at Sasol Mining. This much-anticipated project has led to better coal quality. Combined with other operational improvements, it drove a 10% uplift in production volumes at Secunda Operations in the interim period.
Anyone who has followed industrial companies closely will know that an increase in volumes tends to do great things for unit-level profitability. Overhead absorption per unit decreases as volumes increase, leading to expanding margins even if prices go sideways.
Combined with other operational improvements, the destoning plant at Sasol Mining drove a 10% uplift in production volumes
The problem is that the rand oil price hasn’t been going sideways; it’s been dropping sharply. The dollar oil price fell in the second half of 2025 while the rand got stronger, with this double whammy driving a decrease of 17% in the average rand price of oil in Sasol’s interim period. This is great news for consumers at the petrol pumps in South Africa and bad news for a company that uses local manufacturing processes to produce fuels.
But it’s almost as though someone flicked a switch as we entered a new year, with oil markets waking up to the heightened risk of conflict. The oil price is up more than 20% year to date in dollars. The rand has strengthened by about 4% against the dollar since champagne was popped to welcome the new year, but that’s obviously nowhere near enough to offset the oil rally.
This is why Sasol’s share price is up 39% year to date. But that only explains a portion of the share price move over the past year. What else is at play here?
There’s a general improvement in the South African macroeconomic picture, as evidenced by the latest budget speech. Unlike the oil price, this doesn’t have a direct impact on Sasol, but it influences the valuation investors are willing to put on South African assets. There’s also the fact that Sasol’s share price had come under immense selling pressure. For context, Sasol’s 52-week low is just R53.01, with the share price at R145.31 at the time of writing. And to give you an idea of the potential upside, the share price would need to double from the current level to recover to 2023 prices. It would need to almost triple to take us back to 2022, when Sasol was the darling of retail investors.
The oil price itself has plenty of upside potential. If we see a destabilisation of the broader region and disruption to the Strait of Hormuz, oil prices could quickly return to $100 a barrel (more than 35% higher than currently). And with Sasol’s production issues improving by the day, the strong correlation with the oil price looks set to return.
Sasol just might be the trade of 2026. But the bear case is also strong: the world is incentivised to restore supply and keep oil prices low. As has been the case for Sasol punters in recent years, it’s probably better to be in this one for a good time rather than a long time.
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