Recovering fuel demand in China underpinned market gains late last year while the United States and Europe lagged, but that source of support is fading as a fresh wave of COVID-19 cases has sparked new restrictions.
"The pandemic seems to continue to expand into a second wave in China, with infections rising by the day and reaching again different regions such as Shanghai," said Rystad Energy oil markets analyst Louise Dickson.
"A rise in Chinese infection numbers is of particular concern .. because China is among the world's largest oil consumers and the market that helped oil prices recover the most", she added.
The market is awaiting official oil inventory data from the U.S. Energy Information Administration (EIA) on Friday, after industry data on Wednesday showed a surprise 2.6 million barrel increase in U.S. crude inventories last week compared with analysts' forecasts for a 1.2 million barrel draw.
The report will be published at 11:00 a.m. EST (1600 GMT).
"Global oil demand could decline marginally in the first quarter of 2021 as many regions, including many European countries, have re-introduced mobility restrictions," analysts at Fitch Ratings said in a note.
"The positive effects of vaccination programmes on the oil demand recovery may not be visible for several months until a critical mass of population is inoculated."
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.