US oil settles at a six-year low of $43.08 a barrel

Pro: EOG the Apple of oil
OPEC pumps up production
China throws currency curveball

U.S. crude settled at a six-year low 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. (Tweet This)

U.S. crude hit contract lows, while 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.

Read More OPEC just kicked oil into the $30s

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.

Why people are buying oil

U.S. crude for September delivery ended by $1.88, or 4.18 percent, to $43.08 a barrel, its lowest since Feb. 2009. The front-month continuation contract for U.S. crude had previously struck a 2015 low of $42.03.

Front-month Brent was down $1.25, or 2.42 percent, at $49.19, 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.

Read MoreOil collapse couldn't come at worse time for industry

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.

The U.S. government on Tuesday lowered both its 2015 and 2016 U.S. crude oil production forecasts.

In its short term energy outlook, the U.S. Energy Information Administration lowered its 2015 U.S. crude oil production growth forecast to 650,000 barrels per day (bpd) from 750,000 bpd, and also cut its 2016 U.S. production by 400,000 bpd vs 150,000 bpd decline previously.

Meanwhile, it left its 2015 U.S. oil demand growth forecast unchanged at 400,000 bpd from last month, and raised its 2016 demand growth forecast to 190,000 bpd from 130,000 bpd previously.

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

Read MoreOil: A game of chicken or headless chickens?

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.