Reduced upstream costs are supporting producers but still challenging service providers in 2019. Even with average oil prices likely to remain below 2018 levels, the outlook for ratings on upstream companies is mostly stable. However, the prospects for oil field services remains weak, especially in North America, as CAPEX budgets are expected to be down 5%-10% at a $50-$55 WTI oil price. We also see this soft dynamic persisting for the offshore market, even if it has bottomed out. Oversupply, weak utilization and low day rates remain concerns for 2019 despite a modest uptick in tendering opportunities. Most rated, complex refiners, especially in the US, should be net beneficiaries of IMO 2020, particularly as 2019 draws to a close.
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