Oil prices edged lower on Tuesday as a stronger supply outlook and tepid global demand growth outweighed fears over escalating conflict in the Middle East and its impact on crude exports from the region.

Brent crude futures for December delivery slipped by 49 cents, or 0.7 percent, to $71.21 a barrel by 1117 GMT. US West Texas Intermediate (WTI)crude futures lost 55 cents, or 0.8 percent, to $67.62.

Brent fell as much as 2.5 percent earlier in the session and WTI crude plunged by 2.7 percent before paring losses.

A panel of top ministers from the OPEC+ producer group meets on Oct. 2 to review the market, with no policy changes expected. Starting in December, the OPEC+ comprising the Organizations of the Petroleum Exporting Countries (OPEC) plus allies such as Russia is scheduled to raise output by 180,000 barrels per day (bpd) each month.

The possibility of Libyan oil output recovering also weighed on the market. Libya's eastern-based parliament agreed on Monday to approve the nomination of a new central bank governor, which could help to end a crisis that drastically reduced the country's oil output.

"Opposing forces are keeping oil sideways trading for now," said UBS analyst Giovanni Staunovo, pointing to Chinese stimulus, U.S. oil demand growth and slowing US crude supply growth on the positive side and a looming resumption of Libyan output on the negative side.

In China, manufacturing activity shrank sharply in September, a private sector survey showed on Monday.

Analysts say a slew of stimulus measures over the past week are likely to be enough to bring China's 2024 growth back to about 5 percent after several months of below-forecast data cast doubts over that target, though the longer-term outlook remains little changed.

Israel began ground incursions in Lebanon on Tuesday, with its military saying troops had begun raids against Hezbollah targets in the border area.

The attacks follow Israel's killing on Friday of Hezbollah head Hassan Nasrallah and represent an escalation in a conflict that now threatens to suck in the United States and Iran.

"Risk weighting for front-month oil futures is currently contingent upon what Israel might do next and if there is a direct confrontation with Iran," said independent oil analyst Gaurav Sharma.

In the United States, crude oil and fuel stockpiles were expected to have fallen by about 2.1 million barrels in the week to Sept. 27, a preliminary Reuters poll showed on Monday.

The poll was conducted ahead of a report from the American Petroleum Institute industry group due at 2030 GMT on Tuesday.

Four days ago, Saudi Arabia said is ready to abandon its unofficial price target of $100 a barrel for crude as it prepares to increase output, in a sign that the kingdom is resigned to a period of lower oil prices, according to people familiar with the country’s thinking.

The world’s largest oil exporter and seven other members of the Opec+ producer group had been due to unwind long-standing production cuts from the start of October. 

But a two-month delay sparked speculation over whether the group would ever be able to raise output, with the price of Brent crude, the international benchmark, briefly dropping below $70 this month to its lowest since December 2021.