A man walks past a Sasol synthetic fuel plant. Picture: REUTERS
A man walks past a Sasol synthetic fuel plant. Picture: REUTERS

Sasol, whose share price has fallen a third in three months amid cost overruns at its Lake Charles project in the US, rose to a one-month high on Monday amid a surging oil price.

A weekend attack by drones on oil facilities in Saudi Arabia prompted the biggest intraday spike in oil prices yet, Bloomberg reports. Brent crude was up 10% to $66.52 a barrel on Monday morning.

Sasol has gas-to-liquids operations in Nigeria and Qatar, and is a big producer of synthetic fuel, which is converted from coal.

Oil pared some of its gains amid reports that Saudi Arabia is making progress in restoring production, while the US has said it was willing to tap its strategic reserves to stabilise the markets.

Despite this, oil prices may ultimately settle higher than their pre-attack levels, said London Capital Group analyst Ipek Ozkardeskaya, due to ongoing tension between the US and Iran.

Graphic: KAREN MOOLMAN
Graphic: KAREN MOOLMAN

The US has fingered Iran in the attack, though Iran has denied involvement.

Sasol’s share price closed 9.85% higher on Monday, its best one-day performance in almost six years.

While the higher commodity price benefits Sasol, it was still very much wait-and-see ahead of the company's results, Unum Capital trading desk analyst Lester Davids said.

In general, a weak global oil demand environment still exists and high prices seen recently may not necessarily continue after stabilisation mechanisms are applied, Aeon Investment Management portfolio manager and analyst Zaid Paruk said. 

“For Sasol in particular, having sight of the financials is key for investors in assessing the extent of value destruction that has taken place under current management,” Paruk said.

The company’s share price has been battered recently due to cost overruns at its Lake Charles project, with Sasol having twice delayed the release of its financial results due to a probe of the project.

The latest delay, in September, prompted a 3.47% fall in the company’s share price, which has lost 35.8% since the beginning of May. 

S&P Global Ratings said earlier in September the delay suggested higher management and governance risks, and “suggests potential disclosure restatements in last year’s financial statements”.

gernetzkyk@businesslive.co.za