Futures slipped as much as 6.7 percent in New York after surging 27 percent in the three days through Monday, the most since August 1990. Prices fell as Chinese manufacturing slowed and U.S. crude stockpiles were forecast to have increased. Oil climbed Monday after the U.S. government lowered production estimates and the Organization of Petroleum Exporting Countries said it's prepared to speak with other producers about getting "fair and reasonable prices," according to its bulletin.

Crude will remain at $40 to $60 a barrel into 2016 as rising supplies outpace demand, according to Ian Taylor, chief executive officer of Vitol Group BV, the biggest independent oil trader. Iran plans to boost output by 1 million barrels a day within five months after sanctions against it are lifted, said Oil Minister Bijan Namdar Zanganeh.

"We've just had an extraordinary three-day run," Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut, said by phone. "The market was overextended to the downside but there was no reason to expect a $10 rally. We've got renewed worries about China today and there's a realization that yesterday's statement didn't signal a change in OPEC policy."

Inventory Forecast

West Texas Intermediate for October delivery dropped $3.20, or 6.5 percent, to $46 a barrel at 10:57 a.m. on the New York Mercantile Exchange. The contract settled at $49.20 on Monday, the highest level since July 21. The volume of all futures traded was more than twice the 100-day average.

Brent for October settlement decreased $3.47, or 6.4 percent, to $50.68 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a $4.68 premium to WTI.