OPEC expected to announce further production cuts in March

Oil prices dipped lower on Wednesday on increasing oil supplies that will more than offset Opec's anticipated production cuts.

US light crude for March delivery was down to $40.32 a barrel dropping 46 cents. Prices had earlier risen to $41.92 on reports of decline in Opec production by about a million barrels a day last month but fell on reports of increasing supplies.

With the global economy in a depressed state the demand for oil has shrunk causing a huge buildup in crude supplies. Oil prices have declined from record high levels of $147.27 a barrel last summer to under $40 a barrel.

Opec has responded to the huge stockpiles with production cuts to hold the sagging price line under pressure from member nations. It pumped an estimated 26.23 million barrels per day in January, down from 27.24 million the month before.

Opec's cuts of 2.2 million barrels per day that came into effect recently were announced in December and had been preceded by similar cuts of 2 million barrels per day announced earlier.  Opec member countries pump out about 40 per cent of the present world production.

Meanwhile analysts expect Opec to announce further production cuts during its meeting scheduled for next month. This would be the fourth reduction since September last year when demand started dropping and prices started slipping for the first time in 20 years.