Crude up on Iraq unrest

Oil rose this morning as heavy fighting rocked crude-rich Iraq and as dollar weakness sparked a fresh round of buying.

A bomb struck an oil pipeline today in Iraq's southern city of Basra, where Iraqi security forces have been clashing with Shiite militia fighters, an oil official said, the second such attack this week.

"The main current fundamental risk for oil is the extended fighting in Basra and this morning's report of a bomb attack on one of the export pipelines will bring a risk premium for the weekend," said Petromatrix analyst Olivier Jakob.

Heavy fighting has erupted in a bastion of Shiite cleric Moqtada al-Sadr's militia in Basra, witnesses said, as military operations against gunmen in the southern oil city entered a third day.

The ailing dollar, meanwhile, has made commodities priced in the greenback cheaper for those trading in stronger currencies. Some investment from those buying commodities as an asset class has also returned after heavy liquidation and sharp price falls last week.

A poor economic outlook, however, as the US flirts with recession, still worried players who reckon oil demand could get hit in the longer term.