Oil prices reversed some of last week's losses on Monday and rose from a seven-week low to near $72 a barrel, spurred by bargain-hunting and hopes for a cold front in the US mid-Atlantic region to boost fuel demand.

But mixed signals from the US labour market and growing anxiety over fiscal problems in Europe continued to cast a pall over sentiments and limited oil's gains.

US crude for March delivery rose 45 cents to $71.65 a barrel by 0317 GMT. The contract settled down $1.95 at a seven-week low of $71.19 per barrel on Friday, after earlier hitting a session low of $69.50.

London Brent crude rose 40 cents to $69.99.

'Oil prices are now at the low-$70s level and that typically attracts bargain hunters,' said Ben Westmore, a commodities analyst at National Australia Bank.

'The cold weather in the US is also offering some support, although people may be less hopeful about a weather-related fuel demand spike after having seen bearish US crude inventory reports the past few weeks.'

A blizzard dumped 2 ft (0.5m) of snow across much of the US mid-Atlantic on Saturday, threatening record snowfall in a region heavily dependent on home heating oil and natural gas supplies, and left tens of thousands without power.

Analysts said heightened tensions between Iran and western nations also lent some support to oil prices, which had fallen for four consecutive weeks.

Iran's President Mahmoud Ahmadinejad gave instructions on Sunday for the production of higher-grade nuclear reactor fuel, prompting the United States and Germany to threaten carefully targeted new sanctions against Tehran.

Crude prices fell 2.7 percent on Friday as a tepid employment report in the United States, the world's top energy consumer, again heightened worries of a sluggish recovery in fuel demand.

Oil prices have lost nearly 10 percent this year, dragged down by data showing bulging fuel stockpiles in the US despite cold weather, concerns about slower Asian demand if China further tightens its monetary policy, and more recently jitters about Europe's financial system.

Despite a better-than-expected finish on Wall Street, most Asian stocks fell on Monday, as anxiety over fiscal problems in Europe lingered despite the assurances European finance ministers gave to their Group of Seven counterparts this weekend that the euro zone's debt crisis is under control.

Analysts said oil prices are likely to remain volatile this week, as movements in the US dollar and developments on Europe's fiscal problems remain as the key focal points.

US stocks face more turbulence that could send indexes spiraling through key levels this week as doubts about the global recovery's pace persist and fears linger over Europe's sovereign debt woes.

Separately, money managers cut their net long crude oil futures position on the New York Mercantile Exchange in the week through Feb. 2, the Commodity Futures Trading Commission said on Friday. – Reuters