From the rules:
A city requires 2 Army figures, and all other regions only require 1 Army figure to occupy.
If you do not have enough Army figures in your reserve, you can move figures from regions you control that do not have cities or oases. If you still do not have enough figures, you cannot perform this action.
So, you need to be adjacent to a city to occupy it but you take your figures from the reserve, not from those adjacent, unless you don't have any in reserve. In which case you can take them from adjacent spaces as long as they are not cities or oases.