Oil Price Rally Stalls

Oil prices eased on Wednesday, with the recent rally on increased geopolitical risks and tightening supplies losing steam.

Brent crude, the global oil benchmark, fell 0.6% to $68.10 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.6% at $64.13 a barrel.

Signs of a ramp-up in U.S. shale output in response to higher oil prices is limiting potential gains, analysts said.

"Global oil balances are gradually tightening in the short-term, but in the medium term, shale and other unconventional oil sources impose a $65 a barrel soft ceiling," said Ehsan Khoman, head of research for the MENA region at Bank of Tokyo-Mitsubishi UFJ Ltd (MUFG).

Geopolitical risks in the Middle East, which MUFG estimate have added a $5 to $8 a barrel premium to oil prices, "may likely wind down in the near term," Mr. Khoman added.

Brent crude has fallen 4% over the past week, since peaking at a more than three-year high of $71.28 a barrel on Jan. 25.

Expectations that weekly data from the U.S. Department of Energy could show an increase in crude inventory also weighed on prices. Industry group the American Petroleum Institute on Tuesday reported an increase of 3.2 million barrels for the week ended Jan. 26. Average forecasts in a WSJ survey indicated that the official report from the DOE due Wednesday would show a crude stock build of 1.8 million barrels.

"In view of declining crude oil processing rates and rising crude oil production, it looks like we will see an inventory build in the coming weeks," Commerzbank said in a note.

Nymex reformulated gasoline blendstock--the benchmark gasoline contract---fell 0.9% to $1.85 a gallon. ICE gas oil changed hands at $610.50 a metric ton, down $1.00 from the previous settlement.

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com

(END) Dow Jones Newswires

January 31, 2018 06:42 ET (11:42 GMT)