UPDATE 8-Oil drops 5 pct to below $42 on bleak US jobs data

                                
 * Oil price hits four-year low
                                
 * U.S. employers cut 533,000 job  
                                
 * U.S., European stock markets tumble
 (Updates prices, adds price forecasts in graphs 8, 9)
                                
 By Matthew Robinson
                                
 NEW YORK, Dec 5 (Reuters) - Oil dropped more than 5 percent
to below $42 per barrel on Friday, touching a four-year low
after a U.S. report showed the heaviest job losses in 34 years
in the world's top energy consumer.
                                
 U.S. employers axed payrolls by 533,000 in November, the
weakest performance since 1974, adding to a crush of dour
economic and demand data that has sent crude spiraling down
from highs over $147 a barrel in July. [ID:nHKG345012]
                                
 U.S. crude <CLc1> plunged $2.39 to $41.28 by 1:30 p.m. EST
(1830 GMT) after touching $40.81, the lowest since December
2004. London's Brent crude <LCOc1> traded down $2.54 to $39.74
a barrel.
                                
 "This translates, irrefutably, into further and severe
contracting demand," John Kilduff, senior vice president at MF
Global in New York, said in a research note.
                                
 "Conventional wisdom now holds that there will be a test of
the $40 level fairly soon, perhaps even as soon as today."
                                
 U.S. and European stock markets fell after the jobs report,
while the U.S. auto industry's drive for a $34 billion
emergency taxpayer bailout moved into a second day of testimony
by top executives on Capitol Hill. [ID:nN05451338]
                                
 China and India, two main drivers behind oil's six-year
rally, moved to cut domestic prices for the first time in
nearly two years, curtailing refinery profits to help stimulate
growth in their flagging economies. [ID:nL5375022]
                                
 Analysts have slashed price and demand forecasts on the
mounting economic gloom, with Merrill Lynch <MER.N> predicting
oil could drop to $25 a barrel if the global recession extends
to China.
                                
 Asset manager Jacques Mechelany of Bank of China (Suisse),
who predicted crude would drop to $50 during its peak in July,
said prices could hit $20 a barrel in 2009 as cratering U.S.
demand outstrips Chinese growth. [ID:nL4332749]
                                
 The International Energy Agency lowered its forecast for
global annual demand growth to 1.2 percent from 1.6 percent in
its previous forecast, with increases from China and other
emerging economies outweighing loses in developed markets.
[ID:nL5111738]
                                
 The rapid, steep retracement of oil prices has prompted
OPEC members to call for increasingly strong action when the
Organization of the Petroleum Exporting Countries meets next,
on Dec. 17 in Algeria. [ID:nL3531815]
                                
 OPEC President Chakib Khelil told Algerian state television
on Thursday that the oil-producing group should cut oil output
by a significant amount at the meeting if prices remain at
their current level. [ID:nAHM466378]
                                
 The cartel has already agreed to slash supplies by 2
million barrels per day (bpd) to help prop up prices.
  (Reporting by Matthew Robinson, Gene Ramos, and Robert
Gibbons in New York; Christopher Johnson in London; Maryelle
Demongeot and Nick Trevethan in Singapore; Editing by
Marguerita Choy)