Oil adds to gains as US prepares to ban Russian energy imports, while European natural gas prices trade just below record highs

• Oil extended gains on Tuesday, heading towards $130 a barrel as the US prepared to ban Russian energy imports.
• Russia separately threatened to stop gas flows into Europe in light of Western sanctions.

Oil climbed on Tuesday, against a backdrop of escalating Western pressure on Russia over its attack on Ukraine, as the United States prepared the world's first set of bans on imports of Russias energy products.

Brent crude extended gains, rising 5.1% to $129.59 a barrel, having hit a near-14 year high of $139.13 on Monday, while WTI crude rose 5% to $125.25 a barrel, by 09:31 a.m. ET.

Multiple news outlets reported on Tuesday that the US government was preparing to ban imports of Russian oil, liquefied natural gas, and coal, according to two sources that requested anonymity told Bloomberg, which first reported the news.

Russia's Deputy Prime Minister Alexander Novak had said the previous day that oil could hit as much as $300 a barrel and the consequences of further Western sanctions could spell disaster.

"It is absolutely clear that a rejection of Russian oil would lead to catastrophic consequences for the global market," he said on state TV on Monday.

The US is not as reliant on Russian oil as Europe, which gets 30% of its oil and around 40% of its natural gas from Russia. Around 8% of Russian oil goes to the US.

European natural gas hit record highs on Monday, fueled by the prospect of potential supply disruption, as Russia threatened to cut flows to the region in response to Germany the Nord Stream 2 pipeline project.

UK and Dutch natural gas futures had retreated by about 4.7% on Tuesday, but still held within sight of Monday's all-time peaks. Both have gained more than 200% so far this year.

"This threat of even tighter sanctions on Russian energy imports is likely to see further upward pressure on prices in the weeks ahead, with the very real prospect we could well see prices revisit the levels we saw in September 2008 when prices hit $147.50," said Michael Hewson, chief market analyst at CMC Markets.

The EU gets about 40% of its gas from Russia, while the UK is more insulated, with Russian supply making up just 12% of its imports. Germany especially is very reliant and imports 35% of its gas from Russia.

Russia is also the world's third-biggest oil producer after the US and Saudi Arabia and is responsible for about 12% of global oil production. Its influence over the global energy markets have made European nations reluctant to sanction its commodities directly.

Sharp rises in the commodities markets especially oil affect other markets like the stock market. "If we had to use one market to help gauge the reaction of others today, it would be oil," said Matt Simpson, Senior Market Analyst at City Index.

Russia is already suffering from a barrage of sanctions, and while none have directly targeted its commodities so far, traders are staying away from Russian exports.