Crude Price Rally May Struggle Above $110 as Demand Destruction Takes Hold

The price of Brent crude has surged 13% this week, reaching $108.44 per barrel as of early Friday. The rally is driven by supply fears, including constrained traffic through the Strait of Hormuz and Iran-aligned Houthis seizing Yemen's port of Mocha.

However, according to Dennis Kissler of BOK Financial, futures are in an 'overbought condition' with a 'corrective phase due', making it harder for prices to sustain further gains. The International Energy Agency expects global oil demand to decline by about 1.6 million barrels per day in 2026, which could cap the upside if crude remains elevated.

Naeem Aslam, chief investment officer at Zaye Capital Markets, notes that supply tightness supports prices but demand destruction can limit price increases. China's rapid electrification of its transport system is a key factor, with Sinopec's Economics and Development Research Institute estimating electric vehicles will displace about 1.2 million barrels per day of Chinese oil demand in 2026.

OPEC cut its 2026 global oil-demand growth forecast for a fifth consecutive month to just 380,000 barrels per day, further reducing the room for prices to absorb another supply shock.