After recording an unprecedented drop in demand after COVID-19 hit last year, global oil demand is expected to increase by 6.3 million barrels per day (bpd), or 7%, in 2021 to average 96.7 million bpd, according to a consultancy research agency.

Wood Mackenzie said in a report Thursday that three key factors oil markets and the refining sector hinge on in 2021 are OPEC+ production, COVID-19 developments and the energy transition.

"Our short-term forecast assumes vaccine distribution accelerating through 2021 and is underpinned by 5.0% expected growth in global GDP (gross domestic product), according to our macroeconomic outlook, following the global economy’s 5.4% contraction last year," Ann-Louise Hittle, Wood Mackenzie’s vice president, was quoted in the firm's statement as saying.

She said the pace and strength of the global liquids demand recovery would depend on the pace of COVID-19 vaccine distribution and a worldwide economic recovery.

On the supply side, all eyes will be on the OPEC+’s plan to ease production restraint, said WoodMac, recalling that the group’s massive production cuts eased more with Saudi Arabia’s voluntary reduction in February and March.

"We are assuming output gradually rises from April as the group obtains the planned 5.8 million bpd restraint level by the third quarter of 2021. But OPEC+ decisions are a huge uncertainty for this year. Can OPEC+ negotiate deals each month and remain committed to production restraint? Some production restraint is needed in 2021 for market balance, but compliance could wane with demand recovery," Hittle said.

Even with demand projected to strongly increase, WoodMac said this year refinery utilization would remain low.