Oil prices are expected to remain low for a long period of time. This will significantly affect mineral owners in Texas. Many mineral owns have already seen a large decline in royalty checks. How long will the pain last? Find out below.
Oil Prices will not recover soon
The glory days of easy mail box money are coming to an end of a lot of Texas land owners. Royalty checks have declined over 50% since just 3 years ago! This has led many mineral owners in Texas to consider selling oil and gas royalties. How long will the downturn last?
According to our analysis we expect to see deflated prices below $60 for at least the next 3 years. In the short term we expect prices to remain below $50 for the remainder of 2016. There are a number of negative factors affecting oil prices. The following factors are playing a role in the price of oil going forward:
- Global Demand: We have seen a drop in global demand for oil. Short of a major worldwide economic boom this will remain the same in the foreseeable future. We believe this will continue to weigh on oil prices.
- Supply Concerns: Shale drilling has led to the rapid growth of supply. This oil supply pushes prices lower and creates headwinds for future price increases.
- Completions Delays: We have seen a large number of oil and gas operators drill a well and not complete the well. Operators are doing this to wait until prices move up. This creates a problem because as soon as price moves up supply will come online.
We expect to see continued pressure on oil prices going forward. As the price moves up we expect more supply to come online and push the price back down again. A see-saw effect in prices will be seen until the market hits equilibrium.
If you own oil and gas royalties and you are thinking about selling, now may be a good time. We do not expect to see significant gains in oil prices for the next 5+ years. This low oil price environment means you can sell oil and gas royalties and get a guaranteed amount of income now instead of dealing with monthly fluctuations in income.