Oil sticks near three-month highs despite new Covid lockdowns in Shanghai

By Florence Tan and Jeslyn Lerh

SINGAPORE (Reuters) -Oil prices hovered near three-month highs on Thursday after parts of Shanghai imposed new COVID-19 lockdown measures, though news of China's stronger-than-expected exports in May boosted the demand outlook.

Brent crude futures for August dipped 9 cents to $123.49 a barrel at 0853 GMT, while U.S. West Texas Intermediate crude for July was at $121.89 a barrel, down 22 cents.

Both benchmarks closed on Wednesday at their highest since March 8, matching levels seen in 2008.

China's May exports jumped 16.9% from a year earlier as easing COVID curbs allowed some factories to restart, the fastest growth since January this year and more than double analysts' expectations.

"Of far greater importance is news that a district of Shanghai has been locked down today, reviving fears of another leg of China weakness due to its covid-zero policies. That is capping any gains in Asia today," said Jeffrey Halley, OANDA's senior market analyst for Asia Pacific.

Parts of Shanghai began imposing new lockdown restrictions on Thursday, with residents of Minhang district ordered to stay home for two days to control COVID transmission risks.

"The export performance is impressive in the context of the country's multi-city lockdowns in the month," Stephen Innes, managing partner at SPI Asset Management, said in a note Thursday.

"Still, the apparent negative feedback loop is there is less incentive for the authorities to move away from 'zero COVID' soon," Innes said.

Meanwhile, peak summer gasoline demand in the United States continued to provide a floor to prices.

U.S. gasoline stocks unexpectedly dropped, data from the Energy Information Administration (EIA) showed on Wednesday, indicating resilience in demand for the motor fuel during peak summer despite sky-high pump prices.

"It's hard to see significant downside in the coming months, with the gasoline market likely to only tighten further as we move deeper into driving season," said ING's head of commodities research Warren Patterson.

(Additional reporting by Florence Tan and Jeslyn Lerh; Editing by Shri Navaratnam, Kim Coghill and Jane Merriman)