The North American oil price benchmark rose more than a dollar Thursday, building on Wednesday's one per cent gain.

And importantly for Canadian producers, the spread between that price, West Texas Intermediate, and the European benchmark, Brent, narrowed at one point to less than $15, for the first time since July of last year.

WTI for February delivery gained $1.25 to close at $95.49 US a barrel in New York, its highest level in four months.

March Brent rose $1.47 to $111.16, for a spread between the two of $15.67. In mid-November, the spread was more than $25 and over 2012 as a whole it averaged more than $17.

Prices for Canadian grades have been depressed by a supply glut at the largest U.S. storage hub in Cushing, Okla., the delivery point for New York contracts, with the price of WTI falling by seven per cent over 2012.

The spread fell today on news that flow on the Seaway pipeline, which has a capacity of 400,000 barrels per day, was running at 280,000 barrels, which traders saw as positive, given that much of the oil was heavy crude, which effectively reduces the line’s maximum capacity.

Enbridge, a part owner of Seaway, announced just last week that pump station connections on Seaway, with newly reversed flow from Cushing to refineries on the U.S. Gulf coast, had been completed, allowing operation at full capacity.

WTI also rose after the U.S. Energy Information Administration said crude supplies declined by one million barrels last week. Analysts polled by Platts expected a 2.5-million-barrel climb.

Production continues to rise

Prices were further supported as traders reacted by an attack by Algerian forces on a natural gas plant deep in the Sahara desert where Islamist militants are holding dozens of hostages.

But debate in the Canadian industry continues over how much new pipeline capacity will reduce the spread, and increase returns for Canadian oil producers.

RBC, in a research report released Jan. 9, predicted the spread would narrow to between $8 and $10 over the second half of this year.

CIBC analyst Andrew Potter forecast last month that the WTI discount will remain in the $10 a barrel range.

But many analysts say continued increases in supply from both Canada and the US will lessen the benefits to Canadian producers of the expanded Seaway line and the addition of the south portion of TransCanada’s Keystone XL, expected to add 700,000 barrels a day of capacity late this year.

And today’s Energy Information Administration figures showed storage at Cushing, already at record highs, rose by a further 1.8 million barrels.

The prospect of a continuing glut led Enbridge CEO Al Monaco to assert in October that his firm’s proposed $6-billion Northern Gateway pipeline project to carry oilsands crude from Alberta to B.C.’s northwest coast, was a strategic project for Canada.

Gateway has faced significant opposition from groups concerned about possible spills from the pipeline, or from a tanker on the West Coast.

And the CIBC’s Potter says Gateway and another controversial proposal, the Trans Mountain pipeline expansion through B.C. face "ever increasing political risk," leading him to estimate the odds of building either before the end of the decade at "no better than 50/50."

With files from The Canadian Press