Citi is out with a new take on crude, which is pretty interesting in the context of Goldman’s “green shoots,” note and against what certainly appears to be a brightening fundamental picture.

As we detailed earlier today, oil hit an 8-week high on Wednesday, buoyed by EIA data which largely confirmed Tuesday’s bullish API numbers, jitters about Venezuela, and promises of a cap on Saudi exports. Then, after the bell, we learned that Whiting is cutting its 2017 budget by 14% to $950 million. That came one day after Anadarko announced plans to cut spending.

“It’s been a bullish week certainly, data-wise,” John Kilduff, a partner at Again Capital, a N.Y.-based hedge fund, said earlier on Thursday. “There is an impression that we’re coming into balance finally and it’s driven by this pretty steep decline in U.S. crude oil inventories.”

As far as price action, crude has had a highly amusing day, plunging on heavy volume early in the session only to reverse course and head higher a little over an hour later.

Getting back to the Citi note mentioned here at the outset, the bank notes that despite all kinds of headline risk, “there’s no geopolitical risk premium in the oil price.”

First, Citi notes that the return of Libyan and Nigerian supply is tenuous and in any event, the Venezuela wild card along with sanctions against Iran and Russia have to be factored in:

The biggest supply surprise to the 2017 crude oil market to date has been the return of Libya and Nigerian output, long in persistent disruption. None of the signatories to the OPEC/Non-OPEC agreement to cuts thought this return was on the cards. Their return along with growth in US shale and other light sweet crudes have impacted not just supply but quality imbalances as well. Now with a bare minimal level of disrupted supply, risk has shifted in the other direction. To be sure, the return of disrupted Libyan and Nigerian supply has offset a significant chunk of the OPEC/non-OPEC oil production cuts, but this could reverse, along with disruption risk in Venezuela. 

Global oil supply disruptions remain at very low levels relative to the last 5 years, yet there is no shortage of potential catalysts that could trigger an increase in offline oil. US/UN interactions with Venezuela, Iran and Russia could escalate quickly if unintended consequences of sanctions policies spur more antagonistic behavior by these countries.