-- Oil prices slipped slightly Wednesday, with traders digesting easing tensions in the Middle East, a drop in U.S> crude stockpiles ahead of upcoming clues over the strength of the U.S. economy. 

At 08:50 ET (12:50 GMT), fell 0.1% to $88.36 a barrel, while fell 0.3% to $83.13 a barrel.

Industry data showing an unexpected draw in U.S. inventories offered some support to crude prices, as did weakness in the after softer-than-expected U.S. purchasing managers index data. 

"Sentiment in the oil market remains soft," said analysts at ING, in a note. "The reduced premium for geopolitical risks overshadowed bullish inventory numbers by the American Petroleum Institute."

US inventories unexpectedly fall- API

Data from the American Petroleum Institute showed on Tuesday that U.S. saw a draw of 3.2 million barrels in the week to April 19, ducking expectations for a build of 1.8 million barrels.

The reading usually heralds a similar trend from , which is due later on Wednesday, and indicates some tightening in U.S. markets as the travel-heavy summer season approaches. 

A sustained draw in gasoline inventories in particular indicated that fuel demand in the country remained strong, even as gas prices rose sharply in recent weeks.

But analysts doubt just how high gas prices will rise, given that high gas prices at the pump are a key point of contention for the Biden administration. 

Iran-Israel tensions ease 

Oil prices were nursing a sharp drop from near six-month highs over the past week, as a deescalation in tensions between Iran and Israel saw traders largely price out a risk premium from oil markets. 

But the Israel-Hamas war showed little signs of stopping, keeping some risks of Middle Eastern geopolitics still in play for crude markets. 

US GDP data, PCE inflation data awaited 

Markets were now awaiting first-quarter data from the U.S., due on Thursday, and then Friday's  data, the Fed’s preferred inflation gauge,.for more cues on the world’s biggest fuel consumer. 

The readings are also expected to tie into the outlook for U.S. interest rates, given that strength in the economy gives the Federal Reserve more headroom to keep interest rates higher for longer.

This notion was somewhat dented by weaker-than-expected data for April, which sparked losses in the dollar on Tuesday. A drop in the dollar benefits oil prices, given that they are priced in the greenback.

Weakness in the dollar also helps buoy demand by making oil cheaper for international buyers. 

(Ambar Warrick contributed to this article.)