Oil narrowed losses in Asian trade Thursday after news that China's key manufacturing sector picked up slightly prompted some buying, but analysts said prices remain burdened by a supply glut.
US benchmark West Texas Intermediate (WTI) reversed an earlier tumble, gaining two cents to $80.54 a barrel in afternoon trade, while Brent crude was unchanged at $84.71 after a decline during morning hours.
Both contracts, already at multi-year lows, fell sharply on Wednesday after the US Department of Energy (DoE) reported that American oil inventories climbed by 7.1 million barrels in the week to October 17, more than double market expectations.
The US stockpiles surge added to worries over a market already awash with crude oil and further adding downward pressure on prices.
Members of the OPEC cartel have signalled they will keep output levels stable, with some preferring to cut prices in order to gain share in a competitive market.
Daniel Ang, investment analyst with Phillip Futures in Singapore, said the surge in US inventories came in earlier than the normal cyclical pattern and "clearly displays the global oversupply that we are experiencing".
He said US crude oil inventories were currently higher than levels in 2012 and 2013.
"We believe the US crude inventory is currently at an alarming level and, at this rate, it is likely that (the) US could possibly start cutting US crude oil imports," he said in a note.
British banking giant HSBC said Thursday its preliminary purchasing managers index of manufacturing activity (PMI) for China, the world's top energy consumer, showed a slight uptick.
HSBC said its PMI reading hit 50.4 in October, up from 50.2 in September, indicating activity is picking up and soothing some concerns about the world's number two economy.
Anything above 50 indicates growth and a figure below points to contraction.
The result comes days after Beijing released data showing the economy grew at its slowest pace since the start of 2009.