UPDATE 9-Brent up 2 pct, U.S. crude erases early losses on short-covering

(Rewrites with Brent extending gains and U.S. crude turning
positive)
By Barani Krishnan
NEW YORK, Nov 20 (Reuters) - Oil rose on Friday, erasing
early losses on short covering, with Brent futures up more than
2 percent and U.S. crude holding support at above $40 a barrel.
A firmer dollar .DXY had weighed on oil earlier as
commodities denominated in the greenback became less affordable
to holders of other currencies such as the euro EUR= . USD/
U.S. crude futures had also struggled to stay above $40 as
worries about large domestic oil stockpiles pressured the
market's spot contract ahead of its expiry.
By 1:35 p.m. EST (1835 GMT), Brent futures LCOc1 were up
$1, or 2.2 percent, at $45.18 a barrel.
U.S. crude's West Texas Intermediate (WTI) futures rose 16
cents to $40.70 per barrel. WTI's December contract CLZ5 ,
which expires at Friday's settlement, had fallen to $39.88
earlier in the session, the lowest since Aug. 27.
For the week, Brent rose nearly 4 percent while WTI was
flat.
"WTI couldn't convincingly push below $40 despite a few
attempts today and that's what probably what led to the late
support before contract expiry," said Gene McGillian, senior
analyst at Tradition Energy in Stamford, Connecticut.
"We've also hit technical oversold levels on both Brent and
WTI, making the pre-weekend short-covering logical."
Crude prices were supported as well by the latest weekly
reading on the U.S. oil rig count, which showed a drop of 10
rigs this week. The data, compiled by industry firm Baker
Hughes, is an indication of U.S. oil production in coming
months. RIG/U
While WTI held above $40, its spot December contract reached
a record discount, or contango, of nearly $2 a barrel to nearby
January, showing traders' reluctance to bid oil up in the near
term. On a continuation-basis, the front-month's discount, or
contango, to the second month was the largest since late April.
urn:newsml:reuters.com:*:nL1N13F0R2
Brent's rise was partly supported by a larger premium for
the global crude benchmark versus WTI. U.S. crude has weakened
in four straight sessions against Brent. CL-LCO1=R
WTI's contango blew out in recent weeks, coinciding with the
spike in the number of barrels of U.S. crude being stored, as
traders saw more benefit of buying into oil meant for later
shipment due to weak spot prices. Government data on Wednesday
showed an eighth straight week of builds in U.S. crude
inventories. EIA/S