Oil prices edged up in early Asian trade on Wednesday ahead of key global central bank meetings this week including the US Federal Reserve, as the market also closely watched the latest developments in the Israel-Hamas conflict.

Brent January crude futures rose 0.3 percent, or 28 cents, to $85.30 a barrel by 0330 GMT, after falling more than 1 percent on Tuesday. Brent December futures settled 4 cents lower at $87.41 a barrel at the contract's expiry on Tuesday.

US West Texas Intermediate crude futures gained 0.2 percent, or 16 cents, to $81.02 a barrel after losing about 1.6 percent in the previous session.

"Crude prices are steadying ahead of a key issuance update by the Treasury and FOMC rate decision," said Edward Moya, senior market analyst at OANDA, referring to the Federal Open Market Committee that sets the direction of US monetary policy.

"Geopolitical risks remain and that seems to be offsetting some of the record production levels that are coming from the US"

Crude oil inventories in the US rose by about 1.3 million barrels last week, while fuel stockpiles fell by about 360,000 barrels, according to market sources citing American Petroleum Institute figures on Tuesday. Distillate inventories fell by about 2.5 million barrels.

Interest rate hikes aimed at taming inflation can slow economic growth and reduce oil demand, while rate cuts to spur spending could increase oil consumption.

The Fed, which will end its meeting on Wednesday, is expected to hold rates steady, according to a poll by CME's Fedwatch tool.

In Europe, October inflation in the Euro zone was at its lowest level in two years, falling to 2.9 percent from 4.3 percent in September, a Eurostat flash reading showed, leading to expectations the European Central Bank is unlikely to hike interest rates soon.

The Bank of England will meet on Thursday.

In China, factory activity unexpectedly contracted in October, a private survey showed on Wednesday, adding to downbeat official figures a day earlier and raising questions over its fragile economic recovery at the start of the fourth quarter. China is the world's largest oil importer.

Taking a longer view, Goldman Sachs analysts forecast Brent prices would reach $100 per barrel by next June as stocks descend gently.

While the market is now tightening at a moderate pace, it "may become very tight in a more distant future," although productivity and oil demand trends will also be critical, the analysts added in a note.

In the Middle East, Israeli airstrikes hit a densely populated refugee camp in the Gaza Strip on Tuesday, killing at least 50 Palestinians and a Hamas commander.

US Secretary of State Antony Blinken, who will visit Israel on Friday, said the US and other countries are looking at "a variety of possible permutations" for the future of the Gaza Strip if Hamas militants are removed from control.