Oil price rises after pipeline blown up

Oil held near $106 a barrel this afternoon after saboteurs blew up a major pipeline in Iraq and sharply reduced exports from the south of the country.

Oil's gain was limited by strength in the US dollar, which extended its rally after a final government report showed the US economy grew 0.6 per cent in the fourth quarter of 2007, in line with expectations.

US crude was up 20 cents to $106.10 a barrel by 12.57pm, having earlier risen as high as $107.70. London Brent crude advanced 33 cents to $104.32.

The attack on the pipeline in southern Iraq came on the third day of an Iraqi military operation against fighters loyal to Shia cleric Moqtada al-Sadr in the oil port of Basra.

A fire was quickly extinguished, and officials said efforts were under way to get shipments back to normal. It is the first time since 2004 that the southern supply route has been disrupted.

Iraq exported about 1.54 million barrels per day from Basra in February. Overall Iraqi oil exports have only recently returned to a rate similar to that before the US-led invasion.