Resources index has worst day in 22 years on oil-price slump

The resource index on the JSE had its worst day since its inception in 1998, while the rand flirted briefly with R17 to the dollar yesterday, as plans by Saudi Arabia to slash oil prices and increase production saw international prices plunge.

Oil prices slumped after Opec+ and Russia failed to reach an agreement on plans to cut supply.

This prompted Saudi Arabia to cut its prices and to increase crude production by April, Reuters reported.

The JSE all share dropped 6.23% to 48,819.55 points and the top 40 6.57%.

Resources slumped 12.01% and platinum miners 11.46%.

Synthetic fuel and chemical producer Sasol’s share price dropped by more than 46% to R85.35.

This added to the company’s woes after Moody’s Investors Service last week lowered the group’s long-term rating to junk, saying the cost overruns at its Lake Charles Chemicals Project in the US had burdened Sasol with high financial leverage.

“The oil price collapse is now indicating at least a 65c/litre cut in the petrol price in April, though this is some distance off and markets are highly volatile,” Investec economist Annabel Bishop said in a note.

“Saudi Arabia’s oil price cuts, in the face of Russia not agreeing to new quota proposals, could persist if Covid-19 comes closer to stalling the global economy, causing further marked demand cuts.”

The rapid sell-off comes as the coronavirus death toll and infection rates continue to rise.

Anchor Capital CEO Peter Armitage said: “Nobody can predict what happens next and investors should be prepared for continued volatility.

“As fund managers we are keeping our eye on the horizon and not panic-selling out of quality businesses where we do not think their long-term value has changed.”