Source: Bloomberg (Historical Platts Brent Oil) and oilprice.com (Forecast) OIL PRICES EXPECTED TO REMAIN POSITIVE Our overall financial performance is influenced significantly by the price of crude oil, with every USD5 change in the oil price leading directly to an expected USD3.2 million differential in annual profitability. FY2022 saw a sharp spike in crude oil prices brought about by the Russia-Ukraine conflict and the resulting restriction of Russian oil and gas supplies to Europe, leading to a significant mismatch between global supply and demand. Looking forward, global demand for oil is anticipated to remain positive as economies reopen and global trade progressively regains its pre-pandemic levels. Meanwhile, the European Union is preparing to implement wide-reaching sanctions on Russian oil which could see its imports reduced by up to 90% in the coming months8, thereby keeping global prices elevated. In addition, the sudden production cut of two million barrels per day announced by the Organization of Petroleum Exporting Countries (Opec) and its allies Opec+ would likely boost the oil and gas market in anticipation of the upcoming winter season and the possibility of the reopening of China's economy13. While this outlook will have a positive impact on the Group’s profitability, we remain cautious due to the effect of oil prices on the price of raw materials, which constitute a key input across our Energy and Technology divisions. In addition, the recent imposition of the energy profits levy on oil and gas ring fence trade in the UK North Sea will likely affect our profitability in future years. 20 40 60 80 100 120 140 150 0 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 F Nov-22 F Dec-22 F Jan-23 F Feb-23 F Mar-23 F Apr-23 F May-23 F Jun-23 F Jan-24 F Feb-24 F Mar-24 F Apr-24 F May-24 F Jun-24 F Jul-23 F Aug-23 F Sep-23 F Oct-23 F Nov-23 F Dec-23 F Brent Crude Price Per Barrel (Monthly Average) DAGANG NeXCHANGE BERHAD 50 OPERATING ENVIRONMENT A. STRATEGIC REVIEW
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