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A
slowdown in China's economy, which is still expected to grow by
around 7 percent annually, has been a key driver for the sharp
drop in oil prices over the past year along with rising global
supplies.
Front-month Brent futures <LCOc1> were down 71 cents at $49.70 a
barrel at 1110 GMT, cutting short oil's biggest daily rally
since late May the previous session. U.S. crude <CLc1> fell 80
cents to $44.16 a barrel.
China's central bank made a "one-off depreciation" of nearly 2
percent in the yuan <CNY=SAEC> after a run of poor economic
data, guiding the currency to its lowest point in almost three
years.
"It's bad news for oil because China will have to pay more for
it," Hamza Khan, senior commodities analyst at ING Bank, said.
"On the other hand, if this devaluation is strong enough to lead
to a recovery in Chinese exports and improve China's GDP
figures, then it will be bullish for oil."
"The short-term impact is muted and the long-term impact is
bullish," Khan said.
Also on Tuesday, data showed auto sales in China fell 7.1
percent in July from a year earlier to 1.5 million vehicles,
their biggest decline since February 2013. But overall
seven-month growth this year stood slightly above 2014 figures.
Adding further pressure, OPEC on Tuesday raised its forecast of
2015 oil supplies from non-member countries, a sign that oil's
price collapse is taking longer to hit North American shale and
other competing sources than previously thought.
In a monthly report, the Organization of the Petroleum Exporting
Countries raised its forecast for non-OPEC supply this year by
about 90,000 barrels per day.
"There is still no solid basis for any prolonged price recovery
given that the huge oversupply remains firmly in place,"
Commerzbank said in a note.
(Additional reporting by Henning Gloystein in Singapore; Editing
by Dale Hudson)
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