Heavy crude differential narrows as Alberta oil cuts take effect

The Canadian heavy oil differential narrowed against the West Texas Intermediate (WTI) benchmark on Wednesday, as Alberta’s mandated oil production cutbacks took effect:

* Western Canada Select (WCS) heavy blend crude for February delivery in Hardisty, Alberta, traded on Wednesday afternoon at $12.75 a barrel below WTI crude futures , narrower than Monday’s settle at $15.65 below WTI, according to Net Energy Exchange.

* Light synthetic crude from the oil sands for February delivery was trading at $1 per barrel under WTI, compared with Monday’s settle of $2.50 below.

* The Alberta government announced on Dec. 30 amended rules for its required oil production curtailments, factoring in facilities that are increasing production, operators with single projects and safety considerations.

* The curtailment plan, amounting to 325,000 barrels per day (bpd), started this week in an effort to drain the Canadian province’s excess crude in storage.

* The amended rules added clarity to the market, leading to narrower differentials on Wednesday, the first day of the January trading cycle in which producers nominate crude volumes for Enbridge Inc’s Mainline system, a Calgary-based trader said.

* Global oil prices rose about 4 percent in choppy trading, supported by gains in U.S. equity markets, but concerns remained about rising crude production and weakening global economic growth which could hurt demand for oil.

(Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Richard Chang)