Oil Markets Signal Deeper Supply Shock: Physical Prices Diverge from Futures

• A widening gap between physical crude prices and benchmark futures indicates a potential underestimation of the current supply shock.
• Physical cargoes into Asia are trading between $130-$170, with jet fuel exceeding $220, while benchmark futures hover near $100.
• The market may be approaching a tipping point, with shortages emerging slowly then all at once as spare capacity dwindles.
• Analysts warn that to rebalance demand and supply, prices will need to be significantly higher than current levels.
• Sustained high oil prices could impact India's GDP growth, current account deficit, and inflation, with global earnings also at risk.