The Canadian energy industry may not be popping champagne just yet, but a rebound in local crude prices may offer some reasons for hope.

With producers like Cenovus Energy Inc. (CVE.TO) shipping more oil by rail and U.S. refineries starting back up after a heavy maintenance season, Canadian crude has recovered some of its historic losses. Since hitting a record low on Nov. 15, the spot price of heavy Western Canada Select has risen 35 per cent, or US$4.65 a barrel.

“It’s not that our constraints have gone away, but they are pretty stable,” Joan Pinto, an energy specialist at Canadian Imperial Bank of Commerce, said in an interview.

As WCS has been climbing, the West Texas Intermediate benchmark has been falling in the U.S., driven by increased supplies and speculation that OPEC may forgo a production cut at its next meeting.

The combination of rising WCS and falling WTI has narrowed the gap between the two grades by 22 per cent, or about US$9.50 a barrel, since the middle of the month. The differential -- an important gauge used in Alberta government budget projections -- has shrunk by about a third from its record of US$50 a barrel last month.

Futures prices indicate that WCS will continue gradually recovering, narrowing the differential, currently at US$33.50 a barrel, to about US$25 by May, Pinto said.

Still, despite the recent rebound, WCS prices are well below long-term averages, and new pipelines won’t be coming online until late next year at the earliest. That will reduce cash flow for producers and prompt some to keep a portion of their output shut in until prices recover further.

“Producers are still hurting,” Pinto said.