West Texas Intermediate futures for September delivery fell to $42.01 (-0.52%), while Brent crude slid to $49.58 (-0.10%). Investors are concerned that a weaker yuan may curb China's demand for crude in an oversupplied market, while China has been the second-biggest consumer of oil.

The latest data by the Energy Information Administration showed that U.S. crude inventories declined, although the decline was less than analysts had expected. However stockpiles may start building up again with refineries producing 240,000b barrels a day.

Prospects of additional exports from Iran add to supply glut concerns. Most experts believe Iran stores 30 million to 40 million barrels of oil in tankers, but an Israel-based maritime surveillance company Windward estimates that Iran has 50 million barrels of oil ready to be sold.