SINGAPORE, Aug 20 (Reuters) - Oil prices edged lower on

Tuesday as Israel accepted a proposal to tackle disagreements

blocking a ceasefire deal in Gaza, helping ease concerns over

supply disruptions in the Middle East.

Brent crude was down 67 cents, or 0.86%, at $76.99 a

barrel, as of 0600 GMT. Front month U.S. West Texas Intermediate

crude futures, which expire on Tuesday, were at $73.75 a

barrel, easing 62 cents, or 0.8%. The more actively traded

second month contract was last down 63 cents or 0.86% at

$73.03 a barrel.

Brent had fallen about 2.5% on Monday, while WTI eased 3%.

"Prices seem to find some headwinds from geopolitical

developments in the Middle East and China's demand outlook,"

said Yeap Jun Rong, market strategist at IG, referring to weak

Chinese economic data, which cast doubts on the country's oil

demand prospects.

"A ceasefire deal in Gaza now seems more likely than not,

which saw market participants pricing out the risks of

geopolitical tensions on oil supplies disruption."

U.S. Secretary of State Antony Blinken said on Monday that

Israeli Prime Minister Benjamin Netanyahu had accepted a

"bridging proposal" presented by Washington to tackle

disagreements blocking a ceasefire deal in Gaza, and urged Hamas

to do the same.

Also easing supply concerns, production at Libya's Sharara

oilfield has risen to about 85,000 barrels per day in a move

aimed at supplying the Zawia oil refinery, two engineers working

at the field told Reuters on Monday.

Libya's National Oil Corporation (NOC) had declared force

majeure on oil exports from the field on Aug. 7 after a blockade

by protesters hit production at the 300,000-bpd field.

In the United States, crude stockpiles were expected to have

fallen by 2.9 million barrels last week, a preliminary Reuters

poll showed on Monday.

On the demand side, worries about China's economic problems

pressured oil prices. After a dismal second quarter, the world's

second-largest economy lost momentum further in July as new home

prices fell at the fastest pace in nine years, industrial output

slowed, export and investment growth dipped and unemployment

rose.

"Demand concerns centred around China continue to linger.

Recent data releases reinforce the view of weaker Chinese oil

demand," ING analysts said in a note to clients.

"Trade and industrial output numbers last week suggested

that apparent oil demand continued to trend lower in July. These

worries mean that speculators continue to be hesitant about

jumping into the market."

Investors also awaited indication of the U.S. Federal

Reserve's plans for the next interest rate decision.

The Fed will cut interest rates by 25 basis points at each

of the remaining three meetings of 2024, according to a slim

majority of economists polled by Reuters who said a recession is

unlikely.

Rate cuts reduce borrowing costs and could boost oil demand

in the world's top oil-consuming country.