VIENNA–Oil prices plummeted Thursday as the already battered market reacted to unexpectedly high U.S. unemployment figures – the latest dramatic evidence of recession in the world's largest market for crude.

With cold weather settling in parts of the U.S. and the rest of the Northern hemisphere, this time of year is normally bullish for the market. But the weak US jobs report added to the gloom spread by other dire economic data to counteract the usual trend for increased winter demand.

Skittish U.S. employers slashed 533,000 jobs in November, the most in 34 years, catapulting the unemployment rate to 6.7 per cent, according to figures released by the Labor Department Friday. As companies cut down on their work force, the U.S. unemployment rate bolted from 6.5 per cent in October to 6.7 per cent last month, a 15-year high.

"The damage to the economy by the financial turmoil is much bigger than the market initially thought," said Tetsu Emori, commodity markets fund manager at ASTMAZ Futures Co. in Tokyo. "The economic data now is much worse than what we expected a few months ago.''

Light, sweet crude for January delivery was down $1.43 at $42.24 a barrel – nearly a 4 year low – in electronic trading on the New York Mercantile Exchange by afternoon in Europe after going as low as $42.05 on release of the jobs statistics. The contract fell $3.12 overnight to settle at $43.67, the lowest since January 2005.

"Baby it's cold out there ... on the NYMEX that is," wrote trader and analyst Stephen Schork in his Schork Report. "Given how weak price action is there, last night's 15 F (-9 C) temps in Chicago seem downright balmy.''

Oil prices have fallen about 70 per cent since peaking at $147.27 in July.

Fresh dismal economic news Thursday in the U.S. also pointed to a sharp contraction of gross domestic product in the fourth quarter and weakening demand for crude products, such as gasoline.

The government said the number of people continuing to claim unemployment benefits last week reached 4.09 million, the highest level since December 1982, while the proportion of workers receiving benefits matched a level reached 16 years ago, in September 1992.

Factory orders plunged a bigger-than-expected 5.1 per cent in October, caused by big cutbacks in demand for steel, autos, computers and heavy machinery. It was the largest decrease since an 8.5 per cent fall in July 2000.

On Thursday, AT&T said it was slashing 12,000 jobs, or about 4 per cent of its work force. Chemicals company DuPont said it will cut 2,500 jobs and media conglomerate Viacom Inc. said it will eliminate about 850 jobs.

"It could take a while before the economy and oil prices really hit bottom," Emori said. "Oil seems headed below $40.''

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In other Nymex trading, gasoline futures dropped more than 4 pennies to fetch 93 cents. Heating oil slid by nearly 3 cents to $1.48 a gallon while natural gas for January delivery shed nearly 26 cents to sell at 5.76 per 1,000 cubic feet.

In London, January Brent crude slipped by 72 cents to $41.56 on the ICE Futures exchange.