Investing.com — Oil prices gave up gains to trade lower Tuesday, as tentative progress towards an Israel-Hamas ceasefire cooled expectations about supply disruptions in the oil-rich Middle East.

At 14:00 ET (18:00 GMT),  fell 0.6% to $77.21 a barrel, while fell 0.6% lower to $73.19 a barrel. 

Israel accepts ceasefire proposal, Hamas wary of amended deal

U.S. Secretary of State Antony Blinken said on Monday that Israel Prime Minister Benjamin Netanyahu had agreed to a preliminary American proposal for a ceasefire in Gaza.

Blinken said, however, that Hamas is “now backing away” from the deal, but the latter rejected this claim calling it “misleading,” and also accused the U.S. of amended the previous ceasefire agreement following new demand by Israel. 

The group said it remains willing to accept the previous proposal that was tabled on Jul. 2.

“Biden and Blinken’s statements are misleading claims and do not reflect the true position of the movement, which is keen to reach a cessation of aggression,” Hamas said. “We reaffirm our commitment to what we agreed upon with the mediators on July 2nd.”

Fears that a prolonged conflict in the Middle East could impact oil prices has seen traders keeping a risk premium priced into oil markets. 

But these concerns were diminished by the lack of an Iranian retaliation against Israel over the killing of a Hamas leader in Tehran in July. 

Dollar weakness keeps crude losses in check

The dollar fell Tuesday as investors continue to expect that the Fed Chairman Jerome Powell will deliver his strongest signal yet this week that rate cuts are on the way. 

As oil is priced in the dollars, a weaker dollar tends to make oil more attractive for non-dollar buyers. 

Powell is due to deliver remarks at the annual Jackson Hole summit that kicks o Friday. 

Demand fears, China remains in focus 

In addition to uncertainty over Middle East supplies, oil markets have also been hit by persistent concerns over demand, particularly in top importer China.

China’s central bank kept its benchmark unchanged on Tuesday, after unexpectedly cutting rates in July.

Focus is squarely on signals of more economic support from Beijing, as the government struggles to shore up growth.

China’s oil imports fell for a second consecutive month in July, as soft economic growth weighed on fuel demand in the country. 

“Demand concerns centred around China continue to linger,” said analysts at ING, in a note. “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, despite expectations for a deficit environment for the remainder of the year.”

Fresh weekly U.S. inventories due

Signs of steady U.S. fuel demand have helped somewhat offset concerns over a demand slowdown in China, as U.S. inventories shrank for several consecutive weeks. 

The  will release its estimate of stockpiles later in the session.

The API data are due just a day ahead of the official petroleum report, expecting to show that weekly crude stocks fell by 

(Ambar Warrick contributed to this article.)