We present a microfluidic platform for magnetic manipulation of water droplets immersed in bulk oil-based ferrofluid. Although non-magnetic, the droplets are exclusively controlled by magnetic fields without any pressure-driven flow. The fluids are dispensed in a sub-millimeter Hele-Shaw chamber that includes permalloy tracks on its substrate. An in-plane rotating magnetic field magnetizes the permalloy tracks, producing local magnetic gradients, while an orthogonal magnetic field magnetizes the bulk ferrofluid. To minimize the magnetostatic energy of the system, the water droplets are attracted towards the locations on the tracks where the bulk ferrofluid is repelled. Using this technique, we demonstrate synchronous generation and propagation of water droplets, study the kinematics of propagation, and analyze the flow of the bulk ferrofluid. In addition, we show controlled break-up of droplets and droplet-to-droplet interactions. Finally, we discuss future applications owing to the potential biocompatibility of the droplets.