A view shows oil pump jacks outside Almetyevsk, in the Republic of Tatarstan, Russia July 14, 2025. REUTERS/Stringer

By Erwin Seba

HOUSTON, Dec 11 (Reuters) - Oil prices fell on Thursday as investors focused on Russia-Ukraine peace talks and eyed large surpluses in U.S. gasoline and diesel inventories.

Brent crude futures settled at $61.28 a barrel, down 93 cents or 1.49%. U.S. West Texas Intermediate crude finished at $57.60 a barrel, down 86 cents or 1.47%.

For most of the session, Brent and WTI were down more than $1 and nearly 2%, falling past lows last seen in October.

"The market has been weighed under by significant surpluses in gasoline and diesel inventories," said Andrew Lipow, president of Lipow Oil Associates. "You're seeing that play out in poor refining margins."

The U.S. Energy Information Administration reported on Wednesday that gasoline inventories rose by 2.5 million barrels in the previous week and distillate stockpiles grew by a similar amount.

The prospect of a possible peace agreement between Russia and Ukraine also appeared to be driving the market lower. Such a deal would likely increase the supply of Russian oil that is currently off the market for most of the world.

"There was a little bit of support following news of the drone strikes," said Phil Flynn, senior analyst with the Price Futures Group. "But there seems to be some movement on a possible path to peace between Russia and Ukraine. That took the support out of the market."

Ukrainian drones struck an oil rig belonging to Russia in the Caspian Sea for the first time, halting the facility's extraction of oil and gas, a source at the Security Service of Ukraine told Reuters on Thursday.

The leaders of Britain, France and Germany held a call on Wednesday with U.S. President Donald Trump to discuss Washington's latest peace efforts to end the war in Ukraine, in what they said was a "critical moment" in the process.

Russian Foreign Minister Sergei Lavrov said on Thursday that a visit to Moscow this month by U.S. envoy Steve Witkoff had resolved misunderstandings between the two countries.

Lavrov added that Moscow had handed over Russia's proposals on collective security guarantees for Ukraine to Washington.

STEEP DISCOUNTS DEMANDED ON VENEZUELAN CRUDE

Both benchmarks had settled higher a day earlier after the U.S. said it seized an oil tanker off the coast of Venezuela, as escalating tensions between the two countries raised concerns about supply disruptions.

"So far, the seizure has not trickled down to the market, but further escalation will impose heavy crude price volatility," said Emril Jamil, a senior oil analyst at LSEG.

The seizure was announced by Trump, whose administration did not name the vessel. British maritime risk management group Vanguard said the tanker, named Skipper, was believed to have been seized off the coast of Venezuela.

Traders and industry sources said Asian buyers were demanding steep discounts on Venezuelan crude, pressured by a surge of sanctioned oil from Russia and Iran and heightened loading risks in the South American country as the U.S. boosts its military presence in the Caribbean.

The International Energy Agency upgraded its 2026 global oil demand growth forecasts while trimming its supply growth predictions in its latest monthly oil market report on Thursday, implying a slightly narrower surplus next year.

The Organization of the Petroleum Exporting Countries, which also released its monthly report on Thursday, kept its forecasts for 2025 and 2026 world oil demand growth unchanged.

(Additional reporting by Ahmad Ghaddar in London, Ashitha Shivaprasad in Bengaluru and Jeslyn Lerh in Singapore; Editing by Elaine Hardcastle, Alexandra Hudson, Paul Simao and Nia Williams)