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The oil sensor isn't a fluid level sensor, it's a pressure sensor that confirms there's both oil in the system and that the oil pump is working. The oil level has to be way below the end of the dipstick before the pump sucks air and trips the sensor, first noticed when driving around a corner at speed. It's mid-block height below the exhaust manifold and well above the oil pan. Oil won't come pouring out when you remove it. If the engine has had a chance to sit you won't even get a dribble.
I don't see a torque spec in the Volvo Pocket Data Book for the oil pressure sensor. The spec for the block temp sensor is 30 ft-lbs, which is a similar size thread in the block, so that's what I'd go with and do it with a cold block. Good and snug is really all that's needed.
Unless it's damaged or has been previously removed then the odds of an oil leak there are slim, but if there's oil grunge below it then clean around it and check it after a few days of driving just to be sure.
If it is leaking then removal and cleaning the threads and mating surfaces would be in order rather than overtightening it. Do not use PTFE plumbing tape as the threads provide electrical ground for the sensor. Do not use anti-seize as it's not meant to be a routine service item and come out easily, plus torque specs are always for clean, dry threads unless specifically noted otherwise.
As a bonus oil leak thought here, I'll mention the oil pan drain plug. Although yours looks dry, it's a common area for minor oil weeping. The copper washer is a crush washer. The torque spec to crush it evenly is 28 ft-lbs. Dealer service is supposed to replace it with every oil change to assure a good seal. The washers are cheap and can be had almost anywhere you buy filters (just note it's a metric size and thicker than a steel washer). If you don't have a new one then rather than risk overtightening it and stripping the threads, another option is to re-soften the copper by annealing it, heating it up with a torch until it starts to change color and turn pink then quench in water. You can keep that game up for many years until the washer gets thin.
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Dave -still with 940's, prev 740/240/140/120 You'd think I'd have learned by now
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