Oil prices dipped marginally on Wednesday, continuing severe losses following a slew of negative economic readings that stoked fears about demand, despite other data showing a sustained drop in US stocks.

The possibility of a deescalation in the Israel-Hamas conflict has also hampered predictions that the conflict will impair Middle Eastern oil supply, with various reports claiming that Israel has postponed a planned ground assault on Gaza. 

Crude prices fell almost 2% on Tuesday as disappointing eurozone data pointed to worsening economic prospects in the area, which might hinder oil consumption. 

The dismal statistics mostly overshadowed strong purchasing managers' index readings from the United States, while other data indicated that inventories in the United States likely decreased further in the previous week.

Brent oil prices lost 0.1% to $87.98 per barrel by 20:58 ET (00:58 GMT), while West Texas Intermediate crude futures fell 0.2% to $83.56 per barrel. Both contracts were around two-week lows. 

API reports that US inventories have unexpectedly shrunk.

The American Petroleum Institute (API) reported that US inventories fell by more over 2 million barrels (mb) in the week ending October 20, falling short of forecasts for a 1.6 mb gain.

The number suggested that consistent exports and domestic fuel use were keeping US supplies tight, with fuel demand remained high long after the summer season ended.

The API data typically foreshadows a similar trend in official inventory data, which is due later on Wednesday. The inventory drop coincides with tightening global supplies, following significant production cuts by Saudi Arabia and Russia earlier this year.

The inventory report was preceded by high PMI readings, which revealed that both manufacturing and services activity in the United States unexpectedly increased in October. However, the rate of increase remained slow. 

Nonetheless, the dollar gained from improving data, which pushed on oil prices. A rising currency raises the price of US crude for international buyers.