Oil moved lower on Tuesday as California tightened its pandemic lockdown through Christmas and COVID-19 cases surged in the United States and Europe, counteracting optimism that arose over vaccine advancements.
Oil prices were briefly buoyed after the world's first fully-tested COVID-19 vaccine shot was administered to a grandmother in Britain, but investors quickly returned their focus to ebbing fuel demand caused by the pandemic.
"Much of the weakness has associated with some slippage in risk appetite now that the bulk of the favorable vaccine news has been discounted in forcing the market to focus on a significant up-spike in coronavirus case counts," said Jim Ritterbusch of Ritterbusch and Associates.
A sharp rise in coronavirus cases globally has led to a string of renewed lockdowns, including strict measures in California, the most populous U.S. state, Germany and South Korea.
France may have to delay unwinding some lockdown restrictions next week, government sources said, after signs the downward trend in new cases had flattened after shops were allowed to reopen late last month.
Investors were also closely watching U.S. lawmakers' efforts to approve a new economic stimulus package needed to drive jobs growth and energy demand, and Friday was eyed as a possible deadline to avoid a government shutdown.
The OPEC+ group of oil producers is likely to hold their next meeting on Jan. 4, after agreeing last week to raise oil output by 500,000 barrels per day (bpd) next month.
U.S. crude oil production is expected to fall by 910,000 bpd in 2020 to 11.34 million bpd, the U.S. Energy Information Administration said, a bigger decline than its previous forecast for a drop of 860,000 bpd.
Data from the American Petroleum Institute due on Tuesday and from the U.S. government on Wednesday is expected to show that U.S. crude stocks fell last week while refined product stockpiles rose, according to a preliminary analyst poll by Reuters.