There has been no real progress on the ongoing eurozone crisis. Oil and gas prices remained in a fairly tight band over the last quarter, while politicians in Europe generally didn't contribute anything substantial toward resolving the crisis. Economic data points out of the region tended to be poor, keeping the scenario of lower oil demand and weak oil prices on the table.
China, as typical, took center stage again this quarter. The Canadian government approved the $15.1 billion Nexen/CNOOC deal as well as the Petronas/Progress merger after its initial rejection of Petronas' deal to acquire Progress placed both deals in regulatory limbo. However, the government has indicated that future oil sands acquisitions will be subject to intense regulatory scrutiny. In addition, Chinese economic data points continued to indicate a slowdown is at hand, pointing to weaker demand for oil.
We've introduced a new marginal cost estimate for domestic natural gas of $5.40 per thousand cubic feet versus our prior projection of $6.50 per mcf. Despite the lower price forecast and the negative gas demand implications from the warm winter, we're seeing positive data points at the industry, state, and company levels that support a more bullish out-year take on natural gas prices.
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