Feb 9 (Reuters) - Oil extended its rally on Monday afternoon as a weaker dollar and surge in short-covering activity took crude prices up to nearly $60 a barrel at one point.
Benchmark Brent oil was up $1.20, or 2 percent, to $59 a barrel by 2:00 p.m. ET (1900 GMT), after a hitting a session high of $59.61. U.S. crude futures rose $1.75 to $53.44 a barrel, having risen $2.30 earlier to an intraday peak of $53.99.
Brent's premium to U.S. crude CL-LCO1=R, a key arbitrage for many traders, also narrowed, diverging from the widening trend seen in recent weeks, as U.S. crude outperformed. (Reporting By Barani Krishnan; Editing by Chizu Nomiyama)