Oil prices dropped on the yuan devaluation. The yuan devaluated almost 2% against the U.S. dollar on Tuesday. The People's Bank of China set Tuesday's daily fixing at 6.2298 per U.S. dollar, down from 6.1162 on Monday.

A weaker yuan should help to boost the activity in the manufacturing sector and exports, which dropped 8.3% year-on-year in July.

Market participants are concerned that the oil demand from China could be weak.

The Organization of the Petroleum Exporting Countries (OPEC) released its monthly report on Tuesday. OPEC upgraded its forecast of 2015 oil supplies from non-member countries y 90,000 barrels per day.

"U.S. onshore production from unconventional sources is currently expected to decline marginally in the second half of 2015 through year-end, while U.S. offshore production is expected to grow due to project start-ups," OPEC noted.

OPEC also upgraded its forecast of 2015 world oil demand growth by 90,000 barrels per day, while the demand for OPEC crude oil remained unchanged at 29.23 million barrels per day.

OPEC oil production was 31.5 million barrels per day in July, the highest level since May 2012.

Market participants are awaiting the release of U.S. crude oil inventories data. The American Petroleum Institute (API) is scheduled to release its U.S. oil inventories data later in the day, and U.S. oil inventories data from the U.S. Energy Information Administration is expected on Wednesday.

WTI crude oil for September delivery declined to $43.19 a barrel on the New York Mercantile Exchange.

Brent crude oil for September fell to $48.75 a barrel on ICE Futures Europe.