NEW YORK (Reuters) - Oil rose sharply on Thursday after a bomb attack on a major Iraqi crude pipeline slashed exports from the country’s southern oil port for the first time in years.

U.S. crude settled up $1.68 to $107.58 a barrel, boosting this week’s gains to more than 6 percent. London Brent crude rose $1.01 to $105.00.

“Today’s action was driven up by the explosion and catching fire of a pipeline in Iraq,” said Nauman Barakat, oil trader and senior vice president at Macquarie Futures USA.

The attack on the pipeline happened amid heavy fighting between Iraqi forces and Shi’ite militants in the area.

A shipping source at Iraq’s Basra export terminal said the pipeline attack cut flows on the line to around 1.2 million barrels per day, down 300,000 bpd from average levels, in the first disruption to shipments from Iraq’s south since 2004.

An Iraqi oil official said shipments from the Basra export terminal, which accounts for the bulk of Iraq’s crude exports, could be cut by a third.

Iraqi officials said efforts were under way to get shipments back to normal, but opinions varied widely on how long the disruption to the pipeline would last.

“Independently, the terrorist-related blast in Basra will not take a significant amount of oil off the market. However, the possibility that this event could be the beginning of another string of attacks on infrastructure has tended to crank up the fear premium in this market,” said Jim Ritterbusch, oil analyst at Ritterbusch and Associates.

Crude was also pulled up by heating oil, which rose more than 3.5 percent. Dealers said the late-season gains were supported in part by news an outage at a major South Korean refinery run by S-Oil forced the company to cancel supply contracts in April.

The jump in oil prices Thursday added to a nearly $5 surge on Wednesday that came after a government report showed declines in U.S. fuel stocks as the nation’s refineries slowed to their lowest pace since 2005.

Gasoline inventories fell by a larger-than-expected 3.3 million barrels last week and distillates dropped 2.2 million barrels, the Energy Information Administration said.

Analysts said the weak U.S. dollar has also prompted investors to buy oil and other commodities as a hedge against inflation.