Russia warns oil prices could hit $300 a barrel if the US and Europe reject Russian oil, says the move would have 'catastrophic consequences'

Russia threatened to cut off gas supplies to Europe because of Western sanctions over the invasion of Ukraine.

The message came a day after the US Secretary of State said the US was discussing a ban on Russian oil with Europe.

Russian deputy prime minister Alexander Novak said on state television on Monday that a rejection of Russian oil would have catastrophic consequences for the global market. If not more, it would be $300 per barrel.

The price of oil is currently around $120 a barrel, up about $60 from a year ago. Russia is the third largest oil producer. Dutch gas futures soared 80% on Monday, after the country also supplies 40% of Europe's gas demand.

Germany is the largest economy in Europe, and the natural gas from Russia is transported to it. Russia is taking issue with Germany's decision to stop plans for a second gas line after it sent troops into Ukraine.

Novak said that they have the right to impose an embargo on gas pumping through theNord Stream 1 gas line.

He said that so far they are not taking such a decision.

According to the Financial Times, Frans Timmermans is the European Green Deal commissioner. Increasing renewable energy generation and boosting natural gas imports are some of the measures it is planning to achieve.

The Kremlin knows that European leaders are cautious about any immediate moves to curb Russian energy supplies.

Europe's supply with energy for heating, for mobility, power supply, and for industry cannot at the moment be secured otherwise, said German Chancellor Olaf Scholz in a statement on Monday.

Novak said it would take Europe more than a year to meet the shortfall from Russia.

Novak said that European politicians need to warn their citizens and consumers what to expect. We are ready for it. We know where we could put the volumes.

Oil prices have gone up. The US Energy Information Administration stated in a January report that growth in demand has outpaced growth in production.

Some options traders bet on oil hitting as much as $250 or $300 a barrel, even before the war in Ukraine began. According to the report, traders are betting that oil could reach $200 a barrel this month.

If Russian oil demand continues to be disrupted, oil prices could reach $185 a barrel by the end of the year, according to a note from analysts from JP Morgan.