Canada crude-Heavy grades hit 5-1/2 month high on healthy demand

* Feb WCS trades at $18.00/bbl below WTI

* Feb synthetic trades at 90 cents/bbl above WTI

CALGARY, Alberta, Jan 17 (Reuters) - Canadian heavy crude prices reached a 5-1/2 month high on Friday, helped by increased demand from refineries in the United States and Canada.

Western Canada Select heavy blend for February delivery last traded at $18.00 per barrel below the West Texas Intermediate benchmark, according to Shorcan Energy brokers.

That was the narrowest differential since early August and compares with a settlement price on Thursday of $18.25 per barrel below the benchmark.

Increased processing capacity at the 130,000 barrel per day fire-damaged Co-op refinery in Regina, Saskatchewan, helped strengthen demand. The facility is currently running at 90,000 bpd, a spokesman said, having previously cut rates to 60,000 bpd following an explosion and fire on Dec. 24.

BP Plc (LSE: BP.L - news) 's 405,000 bpd Whiting, Indiana, refinery and Citgo Petroleum Corp's 175,000 bpd Lemont, Illinois, facility are also increasing their intake of Canadian heavy crude over coming weeks.

Analysts said transport links between Alberta's oil sands and refining markets in the United States were improving, alleviating concerns about booming crude production getting bottlenecked in Alberta.

"While accessing the coveted refining region along the U.S. Gulf Coast will continue to be challenging for Canadian supply, the combination of more rail and pipeline capacity will help the Canadian heavy oil supply growth story from becoming a nightmare," TD Securities analyst David Bouckhout said in a 2014 outlook note.

Light (Other OTC: LGSXY - news) synthetic crude from the oil sands for February delivery weakened slightly, last trading at 90 cents per barrel above WTI, compared with a settlement price of $1.65 per barrel above the benchmark on Thursday.