I am using Bitbucket branch source plugin and I have enabled automatic webhook registration. Unfortunately, jobs keep failing to register webhooks with 401 http error code.
Is there any configuration on Bitbucket side that I may have missed?
You may have already checked this but if you're using BitBucket Cloud you need to make sure BitBucket can talk to your Jenkins server. Router, Firewall, etc. allowing access from BitBucket Cloud servers. There is whitelist of IP's available.
https://confluence.atlassian.com/bitbucket/what-are-the-bitbucket-cloud-ip-addresses-i-should-use-to-configure-my-corporate-firewall-343343385.html
Also, on the BitBucket side, the user Jenkins connects as needs Admin privileges on the repo.
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