Even as major global banks and analysts hoped that US crude would average around $58.48 per barrel in 2009?almost $19 more than the current price because of Opec?s planned production cuts?crude oil again fell below $40 on Tuesday undermining the theory that the reduction would significantly push up prices.

Although, prices moved up slightly during the later half of Asian trade due to short covering ahead of key US gross domestic product data, but traders said it is finding difficulty in holding on to the gains made during the weekend surge.

At 1244 GMT (1824 IST) US crude for February delivery was quoted at $40.02 a barrel, up almost 11 cents from Monday?s close. ICE Brent rose 20 cents to $41.65 a barrel.

Crude oil prices recovered by almost $10 a barrel between Friday and Monday on speculation that OPEC?s planned production cuts will counter a slump in demand caused by the deepening global recession.

The Organisation of the Petroleum Exporting Countries that has cut about 5% of world supplies to counter the collapse in demand, last week agreed to an unprecedented 2.2 million barrels per day reduction in supplies and hinted that it is ready to do more if needed.

Analysts however were not convinced that oil which has dropped by over 70% since July has passed through its bear phase.

?It?s a bit of a delayed reaction to the Opec cuts,? Bloomberg news had quoted Toby Hassall, an analyst at Commodity Warrants Australia Ltd as saying in Sydney.

?It?s not like people all of sudden realized cuts will be made but people realized that supply will get cut back significantly in the coming months,? he added.

In India, which is one of the world?s largest consumer of crude oil and imports more than 70% of its annual requirement, government Monday hinted that further reduction in retail prices is possible ahead of general elections.

?To my mind, the government will wait till February before making another round of price cuts,? a senior Petroleum Ministry official said on the sidelines of a function to mark the signing up of the production sharing contracts (PSCs) for the exploration blocks awarded under the seventh bid round of New Exploration Licensing Policy (NELP).

Earlier this month, the government reduced petrol price by Rs 5 a litre and diesel by Rs 2 per litre as international crude oil prices dipped from an all-time high of $147 a barrel in July to under $45 a barrel.

Falling oil brought further cheer for the beleaguered state-run Oil and Natural Gas Corp (ONGC) as government indicated that it is likely to be exempted from subsidising domestic LPG and kerosene because the drop has eroded the gains of the company.

Upstream companies ONGC, Oil India Ltd and GAIL India Ltd give discounts on the crude oil and petroleum products they sell to retailers, sharing at least 33% of the revenue loss on fuel sales to final consumers.

ONGC, shelled out Rs 22,474 crore in the April-September period to subsidise fuel, had in October to mid-November given out discounts of another Rs 3,693 crore.

?The petroleum ministry sent a letter on November 18 informing ONGC and others that they will not have to give any discounts to Indian Oil, Bharat Petroleum and Hindustan Petroleum from the third week of November,? another official said.