Oil prices continued falling Thursday to levels last seen over four years ago as persistent investor pessimism over global crude demand outweighed news of OPEC's largest-ever production cut.

Light, sweet crude for February delivery fell $2.94 US to settle at $41.67 a barrel on the New York Mercantile Exchange.

With the January contract expiring Friday, analysts said the February price was a more accurate reflection of the futures market.

"WTI for January expires (Friday) and … the expiring contract can go anywhere," said Olivier Jakob of Petromatrix in Switzerland, referring to West Texas Intermediate, the type of crude oil used for the Nymex contracts.

"As a world benchmark, January WTI needs to be ignored and the focus kept rather either on February WTI or February Brent," Jakob said.

The January Nymex contract, which expires Friday, fell $3.84 to finish at $36.22. January oil dropped as low as $35.98, a level not seen since June 2004.

The 13-nation Organization of Petroleum Exporting Countries, which accounts for about 40 per cent of global oil supply, said Wednesday it planned to reduce its output quotas by 2.2 million barrels a day.

But markets had already expected a vastly reduced flow of oil and traders focused instead on troubling economic data that points to a long and severe global economic slump.

"The market apparently had already priced in this cut," said Peter McGuire, managing director at investment firm Commodity Warrants Australia in Sydney. "I think OPEC will have to have another meeting in January, and I wouldn't be surprised to see possibly a three million cut next time."

OPEC's next official meeting is scheduled for March. The group had already announced cuts totalling two million barrels earlier this year, also with little effect.

The unprecedented production cuts and the market reaction show just how fast energy demand has fallen during the worst economic downturn in at least a generation.

Oil prices have tumbled 73 per cent since July. What started as a crisis in the U.S. sub-prime mortgage sector last year has mushroomed into a recession in most developed countries and a sharp downturn in emerging nations.

U.S. crude inventories rose slightly last week and gasoline reserves increased as demand stayed below year-ago levels, according to government data released Wednesday.

Analysts had expected crude stocks to fall 900,000 barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.