Oil holds under $72

LONDON (Reuters) -- Oil rose Monday after central banks injected cash into the global financial system and markets eyed tropical depressions stirring in the Atlantic basin.

U.S. crude futures settled up 15 cents at $71.62 a barrel on the New York Mercantile Exchange, after trading as high as $73.19 earlier. London's Brent crude fell 16 cents to $70.23 a barrel.

"The meltdown in global equities seems to have now stabilized - it has given the bulls a little more confidence," said Stephen Schork, president of the Schork Report.

The U.S. Federal Reserve, the Bank of Japan and the European Central Bank pumped more cash into banking systems, raising investor confidence and enhancing the allure of stocks hit by worsening lending conditions.

The credit squeeze in financial markets, triggered by problems in the U.S. sub-prime mortgage market, sparked widespread selling across assets including oil, helping to send U.S. crude prices down from a record high of $78.77 on Aug. 1.

Some analysts have forecast supplies could have trouble keeping up with demand growth later this year unless producer group OPEC ramps up production when it meets in September.

"The recent price declines driven by the liquidation of speculative positions will prove to be short-lived," Goldman Sachs analysts said. "We believe that the current market represents a buying opportunity."

The International Energy Agency, which represents 26 industrialized nations, said last week that world oil demand will grow at a faster pace in 2008.

Oil markets were also watching Tropical Depression 4 in the Atlantic Ocean as well as another depression which could form in the Gulf of Mexico over the next day or so, for signs they could disrupt regional energy facilities in the region.

"I think most people are eyeing the tropical depression that has formed," said Eric Wittenauer at A.G. Edward.

Tropical Depression 4 is moving toward the west near 21 miles per hour with maximum sustained winds near 35 mph, the U.S. National Hurricane Center said Monday.

Analysts are also waiting to see if hedge fund investors rattled by heavy losses demand their money back this week. In order to pull money out at the end of the third quarter, investors will have to notify their managers by Aug. 15.

Redemption notices began piling up weeks ago at funds that specialize in subprime mortgages after two Bear Stearns (Charts, Fortune 500) funds collapsed, and could help push down prices if funds long energy futures face a liquidity crunch, experts said.

"We know the funds are massively long, so there is certainly the potential that we could see a mass liquidation," Schork said. "The market is definitely on guard for that. If there is any sign that there is going to be a liquidation, the bears are just going to pounce on it."

A Reuters poll of analysts ahead of a weekly U.S. government inventory report due out Wednesday forecast data would show a 2.5 million barrel draw for the week through Aug. 10, a 1 million barrel build in distillates and a 900,000 barrel draw in gasoline stocks.