Dec 12 (Reuters) -ICE cotton futures dipped on Monday, pressured by a retreat in oil prices while lingering concerns about the overall demand dented outlook for the natural fiber.

* The front-month March contract CTc1 was down 0.47 cent, or 0.6%, at 81.53 cents per lb by 10:55 a.m. ET (1555 GMT).

* Oil prices fell 3%. Lower oil prices tend to subdue sentiment in cotton markets since they make polyester, a cotton substitute. O/R

* "Crude oil is down pretty sharply today and that might be dragging cotton down a little bit here," said Bailey Thomen, cotton risk management consultant at StoneX Group.

* Limiting losses, the dollar index .DXY fell 0.2%, making cotton less expensive to buyers holding other currencies. USD/

* "Overall, demand continues to have a relatively negative outlook for the time being, there's really not much to get excited about as far as demand goes," Thomen added.

* Investors awaited the U.S. Department of Agriculture's (USDA) weekly export sales report due on Thursday.

* In the week to Dec. 5, speculators trimmed net short position by 2,265 contracts to 6,268, data from the Commodity Futures Trading Commission showed on Friday. CFTC/

* In the grain market, Chicago soybeans edged up as concerns over adverse weather in Brazil and a run of export sales for U.S. supplies underpinned the oilseed market. Wheat and corn prices also ticked higher. GRA/

Reporting by Sherin Elizabeth Varghese in Bengaluru; Editing by Shounak Dasgupta