April 2 (Reuters) -ICE cotton futures edged lower on Tuesday, hurt by a strong dollar and lacklustre demand, while downbeat sentiment across grains and equity markets also weighed on the natural fiber.

* Cotton contract for May CTc1 fell 1.3 cents, or 1.5%, to 91.37 cents per lb by 12:25 p.m. ET (1625 GMT).

* The dollar traded near a more than a four-month-high, making cotton less attractive, especially for overseas buyers. USD/

* "It looks like the old crop - that would be the May and July contracts, reached an area where there's little demand," said Rogers Varner, president of Varner Brokerage, in Cleveland.

* Further dampening demand, Brazil and Australia are "having wonderful production years... so it's very normal for China to switch its buying to those two countries," Varner added.

* Pressuring cotton, Chicago wheat futures edged down on expectations of ample supply, while U.S. stock indexes also fell on the possibility of fewer interest rate cuts than expected.GRA/.N

* Meanwhile, traders are awaiting Thursday's United States Agriculture Department's (USDA) weekly export sales report.

* Last week's USDA's weekly export sales report showed net sales of 98,200 running bales (RB) for 2023/2024, up 8% from the previous week and 46% from the prior 4-week average. EXP/COT

* Putting a floor under prices, Global oil benchmark Brent prices stayed high as supplies faced fresh threats from escalating conflict in the Middle East. Higher oil prices make cotton-substitute polyester more expensive. O/R

Reporting by Anjana Anil in Bengaluru; Editing by Tasim Zahid