Oil rose on Tuesday on expectations Russia reduction in natural gas supply to Europe could encourage a switch to crude, though concerns over weakening fuel demand because of an expected increase in US interest rates limited gains.

Brent crude futures for September settlement climbed 45 cents, or 0.4 per cent, to $105.60 a barrel by 0112 GMT, following a 1.9 per cent gain in the previous day.

US West Texas Intermediate (WTI) crude futures for September delivery increased 34 cents, or 0.4 per cent, to $97.04 a barrel, having gained 2.1 per cent on Monday.

Russia tightened its gas squeeze on Europe on Monday as Gazprom said supplies through the Nord Stream 1 pipeline to Germany would drop to just 20 per cent of capacity.

Russia cut in supplies will leave countries unable to meet its goals to refill natural gas storage ahead of the winter demand period. Germany, Europe biggest economy, faces potentially rationing gas to industry to keep its citizens warm during the winter months.

"Higher gas prices, triggered by Russia gas squeeze, could lead to additional switching to crude from gas and support oil prices," said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

"But a tug-of-war between concerns about weakening demand due to the economic slowdown amid rising US interest rates and fears of supply risk because of prolonged Russia-Ukraine conflict will likely to continue for some time," he said, predicting WTI to remain in a trading range centred on $100 a barrel.

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