* U.S. distillate inventories jumped 4.8 mln bbls-API
* Moody's downgrades Ireland credit rating to junk status
* China's Q2 GDP growth slows, but stronger-than-expected
* Coming Up: IEA oil market report, U.S. EIA oil inventories
By Alejandro Barbajosa
SINGAPORE, July 13 (Reuters) - Oil dropped on Wednesday, after a surprise gain in U.S. crude inventories and the downgrade of Ireland's credit rating to junk status reinforced views of a well-supplied market amid a deteriorating demand outlook.
Brent for August
U.S. stockpiles of distillates including heating oil and diesel posted a larger-than-expected increase last week, the American Petroleum Institute (API) said late on Tuesday, while Europe's debt crisis is prompting forecasters to trim their predictions for demand growth.
"The oil supply-demand balance is not really tight," said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd.
"But in the current market, people are too pessimistic, looking at the weakness in the U.S. economy and the European debt crisis. I am quite confident that the soft patch in the economy should be over in a few months, with support for Brent at $110."
Annual gross domestic product growth in China, the world's second-largest oil user, eased to 9.5 in the second quarter from 9.7 percent in the first, the National Bureau of Statistics said on Wednesday, but the growth rate was stronger than market expectations of 9.4 percent.
Crude inventories in top consumer the United States rose 2.3 million barrels last week, the API said, compared to expectations for a decline of 1.8 million.
Distillates climbed 4.8 million barrels, 12 times as much as forecast, while gasoline stocks unexpectedly fell by 1.6 million barrels. Government statistics from the Energy Information Administration will follow on Wednesday at 1430 GMT.
On Tuesday, U.S. crude futures posted stronger gains than
Brent, narrowing the spread between the contracts
EUROPEAN CRISIS
A deepening European debt crisis and slowing economic growth in China are prompting reductions in forecasts for growth in global oil consumption.
Demand will grow less than previously forecast this year and in 2012 due to a more moderate economic recovery and higher fuel prices, the top U.S. energy forecasting agency said on Tuesday.
In its new monthly outlook, the EIA cut its forecast for 2011 world oil demand growth by 270,000 barrels per day (bpd) to a 1.43 million-bpd increase this year. Oil demand in 2012 will rise 1.58 million bpd, about 10,000 bpd lower than the agency forecast last month.
The forecast came after OPEC also said that world oil demand would grow more slowly in 2012 because of a fragile global economy and deepening decline in consumption in Europe.
Fears of escalating euro zone sovereign debt crisis heightened on Tuesday, after Moody's cut Ireland's credit rating to junk and warned the country might need a second bailout.
European Union leaders are poised to hold an emergency summit after finance ministers acknowledged for the first time that some form of Greek default may be needed to cut Athens' debts and to stop contagion spreading to Italy and Spain.
The Organization of the Petroleum Exporting Countries predicted world oil consumption would rise by 1.32 million bpd in 2012, slightly lower than the growth of 1.36 million bpd expected this year.
Royal Dutch Shell
In other markets, the yen and Swiss franc held most of their recent strong gains in Asia on Wednesday after Moody's cut Ireland's credit rating to junk, while stock markets edged up following two days of losses sparked by fears that Europe's debt crisis could soon engulf Italy and Spain. (Editing by Himani Sarkar)