Oil prices climb Tuesday morning amid threats of a Russian oil supply cut by both Russia and the US.

Monday, German Chancellor Olaf Scholz put a damper on price increases to almost USD 140 per barrel, rejecting an embargo on Russian energy.

Meanwhile, US President Joe Biden is prepared to impose a ban on Russian oil imports, even if the EU sits it out, say sources to Reuters.

A barrel of European reference oil Brent costs USD 127.81 Tuesday morning against USD 128.38 Monday afternooon. Meanwhile, US benchmark West Texas Intermediate trades concurrently at USD 122.98 against USD 119.17 Monday afternoon.

If the US and the EU carry out their plans for a ban on Russian oil imports, it would entail oil prices past USD 300 per barrel and a possible closure of the Nord Stream 1 pipeline, warns Russian Deputy Prime Minister Alexander Novak, according to Ritzau.

For the time being, Germany has rejected a ban on Russian energy. Although Germany, which a top importer of Russian energy, is in the process of switching to alternative energy sources, it is too soon to introduce an immediate import embargo, said Scholz Monday, according to Reuters.

By all indications, however, the West and Russia have realized that a ban can be used as a negotiation tactic by either side, notes market analyst at IG Australia Kyle Rodda and adds that both sides are currently testing how far they can go in their plans for a potential ban.

"We're entering some kind of crisis when it comes to energy security, and the question is how long that lasts and how big it will be. Whatever size it is, it's going to result in higher inflation and weaker growth," he explains to Reuters.

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