The two greatest “tail risks” to oil prices this year are an escalation of tensions between Iran and the West (on the upside) and a worsening of the crisis in the euro-zone (on the downside). In assessing the relative importance of these risks there are two factors to consider: the probability of either development occurring and the potential impact on prices if it does. On balance, we continue to think that the downside risks will dominate in 2012 as a whole, dragging prices much lower.
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