Oil field oil workers at work
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Energy prices are likely to be volatile in the year ahead due to concerns about oversupply and macroeconomic factors dampening economic growth, says a new report from Moody’s Investors Service Inc.

The key issue for the energy sector in 2019 will be whether OPEC and Russia adhere to their promised production curbs, the credit rating agency says.

“Very high Saudi and Russian production, in particular, has heightened supply volatility, so whether OPEC and Russia maintain production discipline and renew agreements to limit output are key concerns going into the new year,” said Steve Wood, managing director for oil and gas at Moody’s, in a statement.

The agency expects that prices for the primary North American benchmark, West Texas Intermediate crude, will be in the range of US$50 to US$70 per barrel.

The credit rating agency also says that the industry’s capital efficiency has improved, but that infrastructure constraints have boosted transportation costs. That means investors in exploration and production companies will continue to wait for better returns in 2019.

“In North America, wide differentials for regional oil and natural gas will narrow as infrastructure coming into service in late 2019 and 2020 eases bottlenecks in the Permian Basin, western Canada and other regions, relieving stress on commodity prices,” Moody’s says.

Meanwhile, the Mexican energy sector faces risks that include a new government policy that shifts Pemex toward refining and away from oil production, says Moody’s, and Asian national oil companies contend with risks from volatile commodity prices, rising shareholder returns and pricing regulations.