Oil prices drop on China currency move

Oil prices fell Tuesday, mirroring sentiment across commodity markets, after China devalued its currency to help boost its economic growth.

Crude prices had already been falling in recent weeks owing to a global supply glut despite forecasts of demand growth.

US benchmark West Texas Intermediate for September delivery fell 83 cents to $44.13 a barrel compared with Monday's close.

Brent North Sea crude for September dropped 66 cents to stand at $49.75 a barrel in London afternoon deals.

Prices had rebounded Monday from multi-month low points.

Fawad Razaqzada, analyst at trading group Forex.com said "concerns about the Chinese economy... (are) continuing to weigh heavily on commodities."

He added in a client note: "This view has been reinforced by China's surprise move overnight to weaken the yuan's daily reference rate."

China's central bank on Tuesday devalued the yuan by nearly two percent against the US dollar, as authorities seek to push market reforms and bolster the world's second-largest economy.

A cheaper yuan will make Chinese exports less expensive, which could potentially boost their overseas sales.

"Clearly, the market has interpreted the move as a sign that the health of the Chinese economy is probably worse than even what the official data suggests," added Razaqzada.

Despite concerns over China, OPEC on Tuesday revised upward its forecast for global oil demand growth in 2015 and maintained projected record levels of world consumption next year.

In its August monthly report, the Organization of the Petroleum Exporting Countries said it was expecting world oil demand to grow by 1.38 million barrels per day -- some 90,000 more than announced in its July estimates.

Oil prices collapsed 60 percent between last June and January, hitting a low of $45 largely owing to a supply glut caused by the boom in US shale oil.

And despite showing signs of a recovery earlier this year, they have started to once more slip back.

On Monday meanwhile, the World Bank warned that the lifting of sanctions related to Iran's nuclear programme would have a "significant impact" on the world oil market in 2016.

OPEC member Iran’s return to the global market would eventually add about a million barrels of oil a day, lowering prices by $10 per barrel, the bank said.

Elsewhere on commodity markets Tuesday, aluminium hit a six-year low point at $1,573.50 a tonne on the London Metal Exchange.

Copper moved closer to a six-year low as it reached $5,166.50 a tonne.