NEW YORK (MarketWatch) -- Crude-oil futures fell Friday for a sixth straight session to their lowest level in four years, ending the week with the biggest loss since the Persian Gulf War in 1991, as worse-than-expected U.S. jobs data darkened the outlook for energy demand.

Crude oil for January delivery ended down $2.85, or 6.5%, at $40.81 a barrel on the New York Mercantile Exchange, the lowest closing level since December 2004. Oil lost 25% during the week, the largest drop since the week ended Jan. 18, 1991. In after-hour electronic trading, oil climbed back 2%.

Crude's weekly loss, the second biggest since oil futures started trading in 1983, surpassed the 24% decline recorded in the week ended March 21, 2003, when the U.S. government confirmed that coalition troops had seized control of Iraqi oil fields.

Friday's drop came as the U.S. Labor Department reported that nonfarm payrolls plunged by 533,000 in November, the worst job loss in 34 years and much bigger than the projected loss of 350,000. See Economic Report.

"The fall in employment was brutal," said James Williams, an energy economist at research firm WTRG Economics. "Folks without jobs drive less, and those in fear of losing their jobs are minimizing expenditures."

The Labor Department also reported that the unemployment rate rose to 6.7% in November, the highest jobless rate since October 1993.

Total U.S. petroleum products supplied in the past four weeks dropped 6.6% from the same period a year ago, the Energy Information Administration reported Wednesday. Motor gasoline demand in the world's biggest oil consuming country dropped 2.8%.

Global oil demand will show an "outright contraction" of 0.5% next year, according to Merrill Lynch analysts, led by Francisco Blanch. They expected crude prices to average at $50 next year.

"Given the rate at which we are selling off, we shudder to think where crude oil prices will be when the boys from OPEC get together in 12 days' time," said MF Global analyst Edward Meir.

The Organization of the Petroleum Exporting Countries, which controls about 40% of the world's oil production, chose not to reduce production at its meeting in Cairo last weekend. However, the oil cartel will meet next on Dec. 17 in Oran, Algeria, where production cuts may be announced.

Also weighing on crude prices Friday was strength in the U.S. dollar, which surged against its major rivals on safe-haven demand. The dollar index DXY, +0.26% , which tracks the performance of the dollar against a trade-weighted basket of six major currencies, rose 0.9% to 87.35. See Currencies.

A rising greenback tends to put downward pressures on dollar-denominated oil prices.

Also on the Nymex, January reformulated gasoline fell 7% to 90.12 cents a gallon, and January heating oil fell 5.5% to $1.4265 a gallon. January natural-gas futures tumbled 4.6% to $5.742 per million British thermal units.

The Reuters/Jefferies CRB Index CRB, -1.01% , a benchmark gauging the prices of major commodities, fell 4.3% to 208.6 points.

Gold and other metals futures also posted steep losses. See Metals Stocks.