Heavy crude discount narrows

The Canadian heavy oil discount narrowedagainst the West Texas Intermediate (WTI) benchmark on Monday,as output cuts by producers helped ease pipeline and railbottlenecks.

* Western Canada Select (WCS) heavy blend crude for Maydelivery in Hardisty, Alberta, settled at $16.20 a barrel belowthe WTI benchmark crude price , according to ShorcanEnergy brokers, compared with Friday's settle of $16.80.

* The discount has narrowed in recent weeks as producerslike Canadian Natural Resources , faced with atransportation issues and the wide differential, have slowedoutput of heavy crude, analysts and traders said.

* The differential was unmoved by the news that KinderMorgan Canada was halting most work on its TransMountain expansion, which would nearly triple capacity on theexisting pipeline from Alberta to British Columbia's coast.

* An expected return of TransCanada Corp's Keystonepipeline to full pressure, following a November leak, would helpreduce the discount, traders have said.

* Light synthetic crude from the oil sands for May deliverylast traded at $2.45 over WTI, a slightly larger premium thanFriday's settle of $1.95.

(Reporting by Julie Gordon in VancouverEditing by Chris Reese)