US Oil Supply hits 80 year high
This just in, US Oil Supply hits 80 year high! Wow! It wasn’t long ago that the United States was just starting the shale revolution. The ability to drill horizontally and frack enabled the United States to start gaining energy independence. Since the 1970’s when oil production in the US Peaked, we have steadily been producing less. With the introduction of Shale drilling and new technologies, our production in the United States has been moving higher at a staggering rate.
When the US Oil Supply hits 80 year high, you know that we have finally reached an inflection point in the industry. In the past it was OPEC who controlled the price of oil. They would decide how much oil and gas to produce and thereby control the prices on the world market. As the United States started producing more and more, it became apparent that OPEC would not be able to completely control price as the United States supply began to make a tangible impact.
This has all come to bear in the past few months as we’ve seen oil prices drop over 50% from their highs. Now that we have more oil inventory built up than anytime in the last 80 years, the oil and gas industry is in for a rude awakening as it scrambles to adjust production to reduce supply. The glut of oil now available is pushing the price of oil and lower and has already had a large impact on the industry.
Impact on Oil and Gas Industry
As with most oil busts, the service companies are usually the first to get hit. We are now seeing service companies cut employees in a major way. These cuts are likely just the first of many we will see across the industry as oil prices remain low. The service companies are not only cutting employees, they are also being forced to cut into their margins by reducing the rates they charge for services. Each service company is going to cling to any remaining business they can hold onto which means razor thin margins.
As far as oil and gas companies are concerned, the pain is just beginning. With the new year just beginning, oil and gas companies are trimming their capital budgets for the year. This means a reduced rig count and less drilling and completion activity. The service companies have already cut jobs in response, but the oil and gas operators are now going to be in the same boat as they no longer need the same staff they required for drilling and completion operations.
Impact on Royalty Owners
If you are royalty owner, the depressed price of oil is going to start taking a toll on royalty checks. If you have’t already, you should be seeing a swift decline in the royalty checks you receive each month. If you rely on your oil and gas royalties checks each month, it can be difficult to predict how much you’ll get next. Many royalty owners are trying to figure out how to sell royalties in Texas so they can just get a lump sum of cash.
If you are holding royalties, now may be a good time to consider the option of selling royalties. If you would prefer to have guaranteed amount for your royalties rather than a fluctuating monthly check, selling can be a good option. However, everyone’s situation is different and selling might not be the right decision for you.
At Sell Texas Royalties, our goal is to inform Texas royalty owners about their options. If we can help assist you with the sale of your royalties, we are happy to help! If you have questions, please fill out the form below.