Saboteurs blew up one of Iraq's two main oil export pipelines in southern Iraq, cutting about half a million barrels a day of oil exports, a Southern Oil Company official told Reuters.
The attack came on the third day of an Iraqi military operation against fighters loyal to Shi'ite cleric Moqtada al-Sadr in the oil port of Basra. The pipeline was attacked 7 km south of Basra. There was no immediate claim of responsibility.
US crude <CLc1> was trading up more than $1 at close to $107 a barrel after news of the attack.
"This morning saboteurs blew up the pipeline transporting crude from Zubair 1 by placing bombs beneath it. The pipeline was severely damaged," the official said, speaking on condition of anonymity.
"Crude exports will be greatly affected because this is one of two main pipelines transporting crude to the southern terminals. We will lose about a third of crude exported through Basra," he said.
Iraq exported 1.54 million barrels per day (bpd) from its main Basra oil terminal in February. A fire raged at the site of the blast on the smallest of the two pipelines, the official said.
"Firefighters are struggling to control the fire, which is huge. A lot of crude has spilt onto the ground. The main pumping station of Zubair 1 was shut down. We will not be able to repair it unless security is provided for the crews," the official said.
Fighting in the area would make controlling the fire difficult, he added.
"If we managed to control the fire today, we will need three days to repair the pipeline," he said.
Iraq's government relies heavily on oil exports for revenue, and had managed to sustain the flow from Basra even as violent insurgency targeted the country's oil installations elsewhere.
Southern oil exports were last interrupted by pipeline attacks in 2004.
In the north of the country, exports of around 430,000 bpd of Kirkuk crude continued to flow through a pipeline to Turkey, a shipping source said.
Persistent sabotage and technical problems had kept the northern export route all but idle since the US-led invasion in 2003, but since last summer Iraq has managed to sustain flows.