The share price of Sasol — a staple stock for local investors — continues to be driven by oil market volatility. This is not just the headline number, but also the futures curve that indicates how long investors expect elevated prices to persist.
In early April, with the Strait of Hormuz effectively closed for a month, spot Brent crude was trading around $110 a barrel, while the December 2026 futures contract sat around $84. That $26 gap reflected the market’s belief that while near-term oil supplies would be constrained, the closure of the Strait would be temporary.
In mid-May, despite negotiations between Iran and the US veering between optimism and disappointment, there is still no clear timetable for a full reopening of Hormuz. At the same time, an American naval blockade has removed Iran’s oil exports of roughly 2-million barrels a day.
Against this deteriorating backdrop, the main reason oil has not spiked further — and in fact moderated, with Brent currently around $100 per barrel — is that the world entered the crisis with ample inventories. This cushion softened the immediate blow. China, normally accounting for over 20% of global oil imports, has reportedly drawn on its elevated reserves and cut purchases by around 25%.
That does not mean the pressure is gone. Even if Iran and the US reach an agreement, each additional day the strait remains closed pushes out the recovery timeline. Shut-in Middle East oil wells still need to be restarted, export schedules rebuilt and tankers rerouted before flows can return to pre-war levels. In the meantime, inventories continue to be drawn down. Once the strait reopens, countries and refiners will eventually have to rebuild those depleted reserves — potentially sparking a second wave of buying pressure.
Compared with the major global oil companies, Sasol has shown far higher sensitivity to the oil price
This explains why the oil futures curve flattened. Spot Brent is currently around $100 per barrel, while the January 2027 futures contract is around $85, leaving a gap of only about $15. The market is increasingly pricing in a “higher for longer” scenario.
That also explains why Sasol’s share price has held up relatively well, despite Brent retreating from its earlier high of around $119. Importantly, the stronger futures curve allowed Sasol to complete its 2027 oil hedging, securing effective cover for between 50% and 65% of its oil exposure at a floor price of $59 a barrel.
Compared with the major global oil companies, Sasol has shown far higher sensitivity to the oil price. The popular US energy ETF XLE, for example, is up only around 22% year-to-date, while Sasol’s share price has surged over 100%.
There are several reasons. More marginal energy producers tend to have greater operational leverage, meaning higher oil prices can have an outsized earnings impact. Sasol also makes refined products, where margins strengthened during the crisis. In addition, some oil majors have Middle East operations that have been disrupted.
In hindsight, the decision by many local fund managers to eschew Sasol in favour of global oil majors for their energy exposure has cost short-term performance. However, that caution was warranted, given Sasol’s operational problems after 2023.
What has changed is that Sasol’s execution appears to be improving from a low base. Secunda and Natref have performed better, despite lower natural gas supply from Mozambique. Further improvement could come from the coal destoning plant, while chemical margins may benefit from management’s self-help measures.
Sasol now offers high operational leverage to the oil price, limited direct Middle East exposure, as well as comparatively low risk of government intervention in South Africa. This makes it a useful hedge against the possibility that the Hormuz crisis lasts longer than expected.
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