Oil--Trading the Brent/WTI Spread: Goldman Says It Is Not Going to Zero (and why refineries are sucky-suck suck investments right now)

We mentioned one of the pipelines that are so critical to pricing in Thursday's "Oil is still at Elevated Levels".

Brent $108.61 down 85 cents, WTI $102.91 down 93 cents. Back on Sept. 24 we wrote:

...Today WTI settled at $103.13 and Brent at $108.64. We would be willing to entertain prop bets at $90 and $95 respectively.

That would imply the spread coming in but it is not happening today.
Finally, for those who think backwardation means "Buy now, supply is tight and it's going higher" here's "Gold in Record Backwardation":

...The shape of the curve, contango or backwardation doesn't do much to inform directional bets, there are a lot of inputs into what the price, current and future ends up being. There is however a meta-message from the structure: If a market is in backwardation it is telling holders of physical to sell now as the future price is lower. This doesn't tell you where the spot price is going to go, backward markets can go up or down but they do help with another of the three factors of commodities trading profitability, roll yield....

From FT Alphaville:

Take yourself back to the heady oil price days of early 2008. Imagine a rogue voice reassuring the market to “fear not, one day soon the US will be saturated in the black oozey stuff”.
What would the market have made of such a concept? Would such a voice have been dismissed as a loon? Very possibly.

And yet, less than six years later comes the following warning from Goldman Sachs:

We view the recent widening of the LLS-Brent differential as a sign that the USGC is close to being saturated with light sweet crude Light sweet crude oil priced at the US Gulf Coast has returned to trading at a wide discount of around $3.00/bbl to Brent since late August. While such a price differential has only briefly been sustained over the past couple of years, we believe that it will increasingly become the new normal as the USGC progressively becomes saturated with domestic light sweet crude oil, reducing the need for seaborne light crude oil imports into PADD3 (US Gulf Coast)....MUCH MORE 

There is so much in this post that if interested in the subject it should be read twice.
LLS is Light Louisiana Sweet. The CME has some handy LLS-WTI futures.

The CME says the LLS-WTI spread should be the marginal cost of transport from Cushing to the Gulf and then inserts the number $10.00 but that seems awfully high