UPDATE 7-Oil drops 5 pct to below $42 on bleak US jobs data

                                
 * Oil price hits four-year low
                                
 * U.S. employers cut 533,000 jobs in November
                                
 * U.S., European stock markets tumble
                                
 (Recasts, updates prices, market activity; changes
dateline, previously LONDON)
                                
 NEW YORK, Dec 5 (Reuters) - Oil dropped 5 percent to a
four-year low below $42 a barrel on Friday 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. [nHKG345012]
                                
  U.S. crude <CLc1> plunged $2.23 to $41.44 by 12:03 p.m.
EST (1703 GMT) after touching $40.85, the lowest since December
2004. London's Brent crude <LCOc1> traded down $2.34 at $39.94
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."
                                
 The jobs data came a day after U.S. retailers reported
dismal November sales figures, and European central banks cut
interest rates to bolster their economies.
                                
 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. [nN05451338]
                                
 China and India, two main drivers behind oil's six-year
rally, on Friday moved to cut domestic prices for the first
time in nearly two years, curtailing refinery profits to help
stimulate growth in their flagging economies. [nL5375022]
                                
 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.
[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)