Oil down 4 pct after China yuan devaluing, weak OPEC outlook

By Barani Krishnan

NEW YORK (Reuters) - Oil fell as much as 4 percent on Tuesday after No. 2 consumer China devalued its currency, raising questions about its demand for crude, while a new projection showed non-OPEC producers were more resilient than expected to keeping output high amid low prices.

U.S. crude hit contract lows, trading about $1 above its bottom for 2015. Brent, the global benchmark, lost most gains from a Monday rally, heading for its largest decline in a week.

"It's time to sell any and all rallies," said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York, who believes oil prices are heading lower.

China's central bank made what it called a "one-off depreciation" of nearly 2 percent in the yuan after a run of poor economic data, guiding the currency to a near 3-year low.

OPEC projected that oil supplies from countries outside the group will rise by 90,000 barrels per day this year, a sign the crude price collapse was taking longer than thought to hit the North American shale oil industry and other competing sources.

U.S. crude for September delivery slipped by $1.95, or 4.3 percent, to $43.01 a barrel by 11:30 a.m. EDT (1530 GMT), after a session low at $42.98. The front-month continuation contract for U.S. crude had previously struck a 2015 low of $42.03.

Front-month Brent was down $1.70, or 3.4 percent, at $48.71, almost erasing gains made in the previous session, when it rallied its most since late May.

U.S. crude has lost 19 percent on the year, extending last year's 46 percent drop. Brent is down 15 percent, after last year's 48 percent tumble.

A global oversupply in oil since last summer, led by stubbornly strong U.S. shale crude output and record pumping by Middle East producers, have driven prices down from June 2014 highs above $100 a barrel.

While weekly inventory numbers for U.S. crude have sometimes come in lower than anticipated, they have not sustained a price recovery.

The American Petroleum Institute, an industry group, will issue its report for last week's inventories at 4:30 p.m. EDT (2030 GMT), after Tuesday's market settlement.

Analysts polled by Reuters expect a 1.8 million barrel decline from the previous week. Official data on stockpiles are due on Wednesday.

China is another factor for the drop in oil and commodity prices, with its historically low growth forecast of around 7 percent in 2015.

(Additional reporting by Ron Bousso in London and Henning Gloystein in Singapore; Editing by Dale Hudson and Bill Rigby)