NEW YORK (CNNMoney.com) -- Oil prices fell below $40 a barrel Thursday, reaching levels not seen since June 2004.
Investors continued to shrug off an upcoming OPEC production cut announced on Wednesday, after which oil closed at a 4 1/2 year low.
U.S. crude for January delivery, which ceases trading on Friday, fell $2.12 to $37.92 a barrel in early trading, but not before touching a trading low of $37.71. The February contract, which begins its front-month run next week, fell $1.69 to $42.86.
On Wednesday, the Organization of Petroleum Exporting Countries, an international trade organization whose members supply about 40% of the world's oil, elected to cut production by 2.2 million barrels a day in January.
But investors were concerned about the slowing global economy's impact on crude demand, and that sent the price down $3.54 to $40.06 a barrel Wednesday, its lowest close since July 2004.
"They're wondering whether OPEC can enforce this cut," because the budgets of many OPEC nations are already stretched incredibly thin, said Nimit Khamar, analyst with Sucden Financial in London.
Investors had also largely ignored other OPEC production cuts made since September, totaling an additional 2 million barrels a day.
Falling demand: Oil prices have shed more than $100 a barrel since hitting a record high of $147.27 a barrel in July as worldwide demand began to decline.
In the United States, the world's largest oil consumer, supplies have been building as Americans cut back.
U.S. crude inventories increased by 500,000 barrels last week, according to the Energy Department.
"We've got more oil than we know what to do with at the moment," said Bob Thomas, head of the energy group at Porter & Hedges, a Houston-based law firm that represents oil companies.
Consumer in the U.S. drove 100 billion fewer miles over the past year, according to a government report.
"We're seeing demand slip everywhere, including China," said Khamar.
Rapidly expanding export-based economies of nations such as China and India are beginning to suffer as much as their counterparts in the developed world, where cash-strapped citizens are consuming less of everything.
"It may take a while for supply and demand to match up," said Thomas.
Looking long-term, the Energy Department said Wednesday that crude oil could rise again, reaching $130 a barrel in 2030 as global supplies diminish. But it also predicted that demand for fuel would rise by only 1 million barrels a day during that time period.
