UPDATE 8-Oil drops on surprise U.S. crude build but tariff deadline eyed

* U.S. crude stocks rise unexpectedly, fuel builds sharply -
EIA
* Stocks at Cushing see biggest draw since Feb 2018 -EIA
* Investors watch China-U.S. trade negotiations
* OPEC expects small supply deficit in 2020

(Adds settlement prices)
By Collin Eaton
HOUSTON, Dec 11 (Reuters) - Oil prices dropped almost 1% on
Wednesday following a surprise build in U.S. crude inventories,
and as investors waited to see if a fresh round of tariffs by
Washington on Chinese goods would come into force on Sunday.
Brent futures LCOc1 settled at $63.72 per barrel, down 62
cents. West Texas Intermediate crude CLc1 fell 48 cents to
settle at $58.76 per barrel.
U.S. crude stockpiles rose unexpectedly last week, while
gasoline and distillate inventories jumped sharply higher, the
Energy Information Administration said. EIA/S
Crude inventories rose 822,000 barrels last week, compared
with analysts' expectations in a Reuters poll for a 2.8
million-barrel drop. At 447.9 million barrels, crude stocks were
about 4% above the five-year average for this time of year, the
EIA said.
However, stocks at the Cushing, Oklahoma, delivery hub for
WTI fell 3.4 million barrels last week, their biggest decline
since February 2018, the EIA said.
U.S. inventories of gasoline jumped 5.4 million barrels and
distillates, which include diesel and heating oil, rose 4.1
million barrels - both more than double analysts' expectations.
U.S. gasoline RBc1 and heating oil HOc1 futures were
down about 2%.
"The inventory data was rather bearish when you consider the
fall in refinery run rates and the cratering of gasoline
demand," said John Kilduff, a partner at Again Capital LLC in
New York. Gasoline demand "had held up most of the year, quite
extraordinarily."
Refinery utilization rates fell 1.3 percentage points last
week to 90.6% of total capacity. Finished motor gasoline
consumption fell to 8.8 million barrels per day (bpd), the
lowest since February, according to EIA data.
Winter storms that brought heavy snows on several U.S.
states last week impacted domestic gasoline demand and likely
caused inventories to rise, said Phil Flynn, senior energy
analyst at Price Futures Group in Chicago.
"People's cars were parked, and you saw a big drop in (fuel)
demand. The market is reacting to headline number, but we don't
see this as a trend, we see it as a one-off," Flynn
said. The Organization of the Petroleum Exporting Countries
released a more bullish outlook for 2020, forecasting demand for
its crude to average 29.58 million bpd next year, less than the
group's November output. OPEC's expectation of a small deficit suggests a tighter
market than previously thought. It had initially projected a
2020 supply glut, but U.S. shale output has grown more slowly
than expected.
However, U.S.-China trade tensions continue to cloud the
outlook for demand, with a Dec. 15 deadline for the next round
of U.S. tariffs on Chinese imports approaching.
OPEC and allied oil producers led by Russia last week
decided to deepen supply cuts amid a weak outlook for oil demand
growth next year.
But a bullish jolt that followed the agreement appears to
have dissipated as demand concerns have emerged again, said Gene
McGillian, vice president of market research at Tradition Energy
in Stamford, Connecticut.
"The market seems to have stalled. There's uncertainty
around fuel demand growth because of the world trade crisis,"
McGillian said.