BEIJING, March 18 (Reuters) - Oil prices ticked up in

early Asian trading on Monday, firming up gains from last week

when prices rose nearly 4% on the view that supply was

tightening.

Brent crude oil futures for May delivery inched up 3

cents to $85.37 a barrel by 0045 GMT. The April contract for

U.S. West Texas Intermediate (WTI) crude was up 10 cents to

$81.14.

"Geopolitical risks also remain elevated," analysts from ANZ

wrote in a note, pointing to a stepped-up campaign of Ukranian

drone strikes on Russian oil refineries over the last week.

On Saturday, one of the strikes sparked a brief fire at the

Slavyansk refinery in Kasnodar, which processes 8.5 million

metric tons of crude oil a year, or 170,000 barrels per day.

A Reuters analysis found the attacks have idled around 7% of

Russian refining capacity in the first quarter.

In the Middle East, Israeli Prime Minister Benjamin

Netanyahu confirmed on Sunday he will proceed with plans to push

into Gaza's Rafah enclave where more than 1 million displaced

people are sheltering, defying pressure from Israel's allies.

German Chancellor Olaf Scholz said the step would make regional

peace "very difficult."

This week, investors are eyeing the outcome of the U.S.

Federal Reserve's two-day meeting to be disclosed on Wednesday.

That will bring more clarity on the timing of interest rate

cuts, Tony Sycamore, a market analyst with IG, wrote in a note.

The Fed will likely keep rates unchanged this month, while

the possibility of interest rate cuts at the June meeting "is

now a coin flip," Sycamore said.

Lower interest rates would stimulate demand in the U.S.,

supporting oil prices.

Both benchmark oil contracts finished last week nearly 4%

higher despite a dip on Friday. Oil been rangebound for much of

the last month, but on Thursday a bullish demand report from the

International Energy Agency sent prices rising to their highest

level since November.

The agency, which represents industrialised countries, had

strengthened its demand outlook for the fourth time since

November as Houthi attacks in the Red Sea drove vessels to

divert, increasing fuel consumption. For the first time, IEA

also predicted a slight deficit this year, instead of a surplus.

U.S. fuel demand also supported prices as refineries

completed some projects.

As of Friday's close, Brent and WTI futures were up 11% and

13%, respectively, in 2024.