Oil Prices Hit Six-Year Low as China Devalues Yuan

Oil prices fell to their lowest value in six years on Tuesday, as China rapidly devalued the yuan and increased production from the Organization of the Petroleum Exporting Countries (OPEC) continued to drive down demand and raise supply.

Crude oil prices stabilized on Wednesday after falling more than 4 percent on Tuesday to reach $43.28 a barrel, their lowest price since March 2009. OPEC oil production reached a three-year high in July.

China's rapid devaluation of the yuan on Tuesday and Wednesday brought the currency to its weakest point since August 2011, and raised concerns across the stockmarket about the health of the world's second largest consumer of oil, reports the Guardian. A weakening of the Chinese yuan is likely to reduce demand for oil imported from abroad, driving prices even lower.

OPEC, whose members are responsible for 40 percent of the world's oil supply, has refused to lower output in response to falling prices and raised it in July to 31.5 million barrels a day, the highest level since May 2012, Market Watch reported.

The World Bank warned on Monday that the influx of one million barrels of Iranian oil into the global oil supply will lower the price of U.S. oil by a further $10 by the end of the year.

The International Energy Agency (IEA) said the fall in oil prices has encouraged demand in the oil market. However, the IEA said on Wednesday that: "While a rebalancing has clearly begun, the process is likely to be prolonged as a supply overhang is expected to persist through 2016—suggesting global inventories will pile up further," according to Reuters.

The Paris-based energy watchdog anticipates that the total global oil demand will grow from 93.6 million barrels per day in the first quarter to 95.2 million barrels per day by the end of the year due to falling prices. This increase is "the fastest pace in five years," it adds.

According to the same IEA projection, if global oil continues to be produced as it has over the first half of the year, the supply surplus will continue into 2016. At the current rate of oil production, the supply will exceed demand by 1.4 million barrels a day until the end of the year.