Oil markets worldwide are undergoing significant shifts as geopolitical tensions and forecasts of tightening supply and demand dynamics shape the industry’s trajectory.

The Financial Times reported last Thursday that oil prices surged to their highest levels in four months, propelled by projections from the International Energy Agency (IEA) indicating that demand would exceed market supply. Brent crude, the global benchmark, breached the $85 mark for the first time since November, while West Texas Intermediate rose to $81.04 per barrel.

The IEA’s forecast of a “slight deficit” in the oil market for the year underscores a notable reversal from earlier predictions of a surplus.

This surge in oil prices comes amidst escalating geopolitical tensions, with Ukraine conducting drone strikes on oil refineries deep inside Russia. The resulting disruptions, FT reports, coupled with a report indicating a decline in US oil inventories, have contributed to consecutive gains in the market. Additionally, hedge funds have increased their net bets on rising oil prices since December, further bolstering market sentiment.

Meanwhile, Europe’s oil refineries are experiencing a renaissance amid the shifting geopolitical landscape. Despite a long-term decline in refining capacity driven by net-zero emissions targets and the rise of electric vehicles, Europe’s refineries are now in high demand.

Vitol’s recent bid to acquire a controlling stake in Saras, one of Europe’s largest refineries in Sardinia, underscores the increased competition for refining assets. Tighter capacity has led to higher premiums for refined oil products, creating lucrative opportunities for refiners amidst elevated margins for diesel and gasoline.