Crude oil prices fell to a four-year low around $40 a barrel, down more than 6 per cent from Friday's close, after reports showed the heaviest US job losses in 34 years.

US, the world's biggest oil consumer, reportedly shed 533,000 jobs in November, the weakest performance since 1974, amidst a continuing economic downturn led by a financial crisis.

Light sweet crude on the New York Mercantile Exchange hit a low of $40.50 a barrel - the lowest level in the past four years - and was later seen down $2.86 at $40.81 a barrel.

North Sea Brent crude on London's ICE exchange settled down $2.54 at $39.74 a barrel.

Analysts have slashed demand forecasts drastically amidst the mounting economic gloom and said prices could hit $20 a barrel in 2009 as the fall in US demand outstrips growth in Chinese demand.

The International Energy Agency expects global oil demand to grow at 1.2 per cent, down from its earlier projection of 1.6 per cent, with increases from China and other emerging economies outweighing loses in developed markets.

The Organisation of Oil Exporting Countries (OPEC), which already announced a 2 million barrels per day cut in production, is expected to  announce further cuts in production when they meet in Algeria on 17 December.

OPEC president Chakib Khelil expects the oil-producing group to agree on a significant cut in output if prices remain at their current levels.