Heavy crude discount narrows on more rail

The Canadian heavy oil discountnarrowed against the West Texas Intermediate (WTI) benchmark onFriday, continuing a rally as production cuts have freed uppipeline space and more rail capacity has been made availablefor crude shippers.

* Western Canada Select (WCS) heavy blend crude for Maydelivery in Hardisty, Alberta, settled at $14.40 a barrel belowthe WTI benchmark crude price , according to ShorcanEnergy brokers, compared with Thursday's settle of $15.05.

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

* The short-term view has also been impacted by theavailability of more trains to ship the crude, said ZacharyRogers, an analyst with energy consultancy Wood Mackenzie.

* 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 $1.75 below WTI, narrower than Thursday's settleof $2.20.

(Reporting by Julie Gordon in Vancouver; Editing by Diane Craftand Sandra Maler)