*

Brent and WTI climb

*

China's Shandong Port blacklists U.S.-sanctioned oil

vessels,

traders say

*

Middle East market strength provides support

*

Economic data undermine demand hopes

(Updates prices at 1119 GMT)

By Arunima Kumar

Jan 7 (Reuters) -

Oil prices climbed on Tuesday reversing earlier declines, as

fears of tighter Russian and Iranian supply due to escalating

Western sanctions lent support.

Brent futures were up 61 cents, or 0.80%, to

$76.91 a barrel at 1119 GMT, while U.S. West Texas Intermediate

(WTI) crude climbed 46 cents, or 0.63%, to $74.02.

It seems market participants have started to price in

some small supply disruption risks on Iranian crude exports to

China, said UBS analyst Giovanni Staunovo.

Worries over supply tightness amid sanctions, has

translated into better demand for Middle Eastern oil, reflected

in a hike in Saudi Arabia's February oil prices to Asia, the

first such increase in three months.

Also in China, Shandong Port Group issued a notice on Monday

banning U.S. sanctioned oil vessels from its network of ports,

according to three traders, potentially restricting blacklisted

vessels from major energy terminals on China's east coast.

Shandong Port Group oversees major ports on China's east

coast, including Qingdao, Rizhao and Yantai, which are major

terminals for importing sanctioned oil.

Meanwhile, cold weather in the U.S. and Europe has boosted

heating oil demand, providing further support for prices.

However, oil price gains were capped by global economic

data.

Euro zone inflation

accelerated

in December, an unwelcome but anticipated blip that is

unlikely to derail further interest rate cuts from the European

Central Bank.

"Higher inflation in Germany raised suggestions that the ECB

may not be able to cut rates as fast as hoped across the

Eurozone, while U.S. manufactured good orders fell in November,"

Ashley Kelty, an analyst at Panmure Liberum said.

Technical indicators for oil futures are now in overbought

territory, and sellers are keen to step in once again to take

advantage of the strength, tempering additional price advances,

said Harry Tchilinguirian, head of research at Onyx Capital

Group.

Market participants are waiting for more data this week,

such as the U.S. December non-farm payrolls report on Friday,

for clues on U.S. interest rate policy and the oil demand

outlook.