UPDATE 7-Oil steadies on U.S. crude inventories fall, demand hopes

* U.S. crude stockpiles drop, products higher -EIA
* U.S.-China Phase 1 trade deal should boost demand
* Deeper cuts by OPEC, allies support market sentiment

(New throughout; updates prices, market activity and comments;
changes byline, new dateline, previous LONDON)
By Laila Kearney
NEW YORK, Dec 18 (Reuters) - Oil prices steadied on
Wednesday after U.S. government data showed a decline in crude
inventories and on expectations for an uptick in demand next
year on the back of progress in resolving the U.S.-China trade
fight.
Brent futures LCOc1 gained 6 cents to $66.16 a barrel by
10:52 p.m. EST (1552 GMT), while U.S. West Texas Intermediate
(WTI) CLc1 lost 7 cents to $60.87 a barrel per barrel.
U.S. crude fell by 1.1 million barrels in the week to Dec.
13 to 446.8 million barrels, compared with analysts'
expectations in a Reuters poll for a 1.3 million-barrel drop,
the Energy Information Administration said. EIA/S
Gasoline and distillate inventories grew last week by 2.5
million barrels to 237.3 million barrels, and 1.5 million
barrels to 125.1 million barrels, respectively, EIA said.
Oil pared losses after the data, which contradicted
Tuesday's report of a build in U.S. crude stockpiles from
industry group American Petroleum Institute (API). API figures
released showed U.S. crude inventories swelling by 4.7 million
barrels last week to 452 million barrels, sparking a
post-settlement sell-off in oil futures. API/S
"The market reaction was abruptly stronger due to the fact
that we were so far away from industry estimations in the way of
a net build," said Tony Headrick, an energy markets analyst at
CHS Hedging.
"The upward trend from optimistic demand expectations such
as from recent developments like U.S.-China trade deal has the
ability to stay in tact after these figures," Headrick said.
Prices had risen more than 1% in the previous session after
the announcement last week of the so-called Phase 1 U.S.-China
trade deal, which lifted global economic prospects and improved
the outlook for energy demand.
Deeper production cuts coming from the Organization of the
Petroleum Exporting Countries and its allies, such as Russia,
which make up a group known as OPEC+, continued to offer some
support and prevented a further slide in prices.
OPEC+, which has cut production by 1.2 million barrels per
day (bpd) since Jan. 1 this year, will make a further cut of
500,000 bpd from Jan. 1 to support the market.
RBC Capital Markets said prices could stagnate if trade
progress did not translate into concrete economic growth.
"Economic green shoots will help sentiment", the bank wrote.
"But broad macro worries, oil demand softness and pent up
producer hedging may continue to serve as near term headwinds
for oil prices."