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By Bloomberg

Oil fell after the biggest rally in a month in New York as a recovery in Iranian production pushed OPEC supplies to the highest in more than three years.

West Texas Intermediate futures declined as much as 2.6 percent. The Organization of Petroleum Exporting Countries raised output by 100,700 barrels a day to 31.5 million last month, the most since June 2012, the group said in its monthly report, citing external sources. Crude also fell as China devalued its currency, fanning concern demand in the world’s second-biggest oil user may slow as import costs rise.

Oil has dropped more than 25 percent since this year’s peak closing price in June on concern the global surplus that drove crude into a bear market will persist. In July the Bloomberg Commodity Index of 22 raw materials capped the biggest monthly decline since 2011 on faltering demand in China and expanding supply.

“There is still no solid basis for any prolonged price recovery, given that the huge oversupply remains firmly in place,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report.

West Texas Intermediate for September delivery fell as much as $1.17 to $43.79 a barrel on the New York Mercantile Exchange and traded at $43.84 at 1:11 p.m. London time. The contract gained $1.09 to $44.96 on Monday. The volume of all futures traded was about 78 percent above the 100-day average. Prices have decreased about 18 percent this year.

Brent Premium

Brent for September settlement dropped 96 cents to $49.45 a barrel on the London-based ICE Futures Europe exchange. It climbed $1.80 to $50.41 on Monday. The European benchmark crude traded at a premium of $5.63 to WTI.

Iran increased output by 32,300 barrels a day in July to 2.86 million a day, the highest since June 2012, according to data OPEC compiles from “secondary sources.”

China cut the yuan’s reference rate by the most in two decades, allowing depreciation to combat a slump in exports. The devaluation ends a de facto peg to the dollar that’s been in place since March and battered exports. The change was a one- time adjustment, the central bank said in a statement, adding that it plans to keep the currency stable at a “reasonable” level and will strengthen the market’s role in determining the fixing.

“We already know that China’s economy is not doing great,” Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said by e-mail. “Trying to stimulate exports by devaluation can help the economy so overall I view the move as neutral for oil.”

China Outlook

WTI rose the most in two months on Monday as Chinese crude imports climbed to a record in July. Overseas purchases gained almost 30 percent, driven by buying from small private refineries, according to preliminary data released by the Beijing-based General Administration of Customs on Aug. 8.

Investor concern that oil could by dragged down further by an Iranian sale of crude inventories once sanctions are lifted is overdone, according to a Bloomberg Intelligence survey published Tuesday. Iran’s stockpile of crude amounts to 20 to 40 percent of one day’s global oil demand and the nation will add less than 1 million barrels a day to crude supply next year, most of the survey’s 121 respondents said.

In the U.S., crude supplies probably shrank by 2 million barrels last week, according to a Bloomberg survey before Energy Information Administration data Wednesday. Shale output will decline for a fifth straight month in September, the EIA projected in a separate report Monday.