Oil climbs on expectations of tight supply as Russia sanctions loom

Oil rose in early Asian trade on Monday as expectations of tighter supplies globally ahead of European Union sanctions on Russian oil underpinned prices.

Brent crude futures climbed 54 cents, or 0.6%, to $94.04 a barrel by 0125 GMT while U.S. West Texas Intermediate crude was at $85.56 a barrel, up 51 cents, or 0.6%.

Brent posted a 2% gain last week on a weaker dollar and on hopes of easing COVID-19 restrictions in China that would allow demand at the world's No. 2 consumer to rebound.

Disruptions to global oil supplies are expected when the EU's ban on Russian imports goes into effect on Dec. 5. The group also plans to block imports of Russian oil products in February.

Sentiment is building within the Federal Reserve to possibly scale back the pace or size of future interest rate hikes even as it is poised to raise rates in early November.

A slowdown in Fed rate hikes could ease the U.S. dollar's strength which has weighed on prices of commodities. A weaker dollar makes dollar-denominated commodities such as oil more affordable to holders of other currencies.

On Sunday, China's Xi Jinping secured a precedent-breaking third leadership term on Sunday, cementing his place as the country's most powerful ruler since Mao Zedong.

However, analysts are not expecting any significant change in policy direction, including Xi's zero-COVID strategy.

Brent rose last week despite U.S. President Joe Biden announcing the sale of a remaining 15 million barrels of oil from the U.S. Strategic Petroleum Reserves. The sale is part of a record 180 million-barrel release that began in May. Biden added that his aim would be to replenish stocks when U.S. crude is around $70 a barrel.

"The market was more interested in the guidelines for refilling the reserve," ANZ analysts said in a note.

"Biden's comments that the U.S. will only buy crude once prices hit USD70/bbl provides a strong support level."

Last week, U.S. energy firms added oil and natural gas rigs for the second week in a row as relatively high oil prices encourage firms to drill more, energy services firm Baker Hughes Co said in a report on Friday.