Armed men blew up a pipeline pumping crude oil to Es Sider port on Tuesday, cutting Libya's output by up to 100,000 barrels per day (bpd), military and oil sources said.
The state-run National Oil Corporation (NOC) said in statement output had been reduced by 70,000-100,000 bpd. The cause of the blast was unclear, it added.
The attackers arrived at the site near Marada in two cars and planted explosives on the pipeline, a military source said.
Pictures purportedly showing a huge cloud from the blast in central eastern Libya circulated on social media.
The damage was still being assessed, one oil source said. Oil prices rose on the report.
Islamic State fighters had a presence in the area until government forces expelled them from their main stronghold in Sirte a year ago.
The operator of the pipeline is Waha, a subsidiary of the NOC and a joint venture with Hess Corp, Marathon Oil Corp and ConocoPhillips.
Waha pumps a total 260,000 barrels a day, its chairman said last month.
The North African state's oil production was last put by officials at around one million bpd but exact figures are hard to obtain in a country riven by factional conflict.