WTI discount to LLS

If the flood of new crude arriving at the Gulf Coast during the first six months of 2014 overwhelms refiners in the region, then the pricing consequences may very well be quite radical. Could prices at the Gulf Coast flip to trade at a discount to West Texas Intermediate (WTI) crude delivered at the Cushing hub that is home to the CME NYMEX contract? Even if Gulf Coast crude retains its premium over WTI, deep discounts may be required to encourage refiners to process increasing quantities of light sweet crude. A downward spiral of crude prices could ensue.  Today we lay out possible price scenarios.