SAUDI ARABIA INV THE SAUDI ARABIA INV FD : Oil up to $42 on Saudi cuts

LONDON (Reuters) - Oil prices rose to around $42 a barrel on Friday on signs Saudi Arabia will cut supplies further next month, but gains were capped ahead of data expected to show a big jump in U.S. unemployment.

By Christopher Johnson

Non-farm payrolls figures, due at 1330 GMT (8:30 a.m. EST), are likely to show more than half a million Americans lost their jobs in December, a Reuters poll showed, the highest monthly job losses in 34 years.

U.S. crude for February delivery was up 22 cents at $41.92 a barrel by 0953 GMT (4:53 a.m. EST), after climbing $1.00 to $42.70. London Brent crude was 53 cents higher at $45.20.

Crude fell 2.2 percent to settle at $41.70 on Thursday, after a 12 percent slump on Wednesday, the biggest daily percentage drop in more than seven years.

"Of course, we are getting used to negative economic news, but this U.S. jobs data is likely to be very, very bad," said Frank Schallenberger, head of commodity research at Landesbank in Stuttgart.

"Short-term, oil is held within a fairly narrow range between $40 and $45. I don't see $50 in the near future."

Top crude exporter Saudi Arabia is the latest member of the Organization of the Petroleum Exporting Countries to show it is cutting output in line with a deal agreed in December.

It will deepen its supply cuts in February from January to at least three Asian crude buyers, industry sources said on Friday.

Earlier this week, Kuwait and Iran also told customers of bigger supply curbs this month, after the cartel agreed its biggest ever production cut in December in a bid to bolster prices.

One prop of the recent rally that had lifted oil prices since the start of the year looked likely to be removed, after Russia reached an agreement to deploy European Union monitors to ensure the smooth flow of gas via Ukraine.

The threat of widening supply disruptions in Europe from the Russia-Ukraine gas row, as well as Israel's invasion of Gaza, had boosted oil to a one-month high of $50.47 on Tuesday.

While the Gaza conflict does not directly threaten oil supplies, Middle East unrest can bolster prices because countries in the region pump about a third of the world's oil.

Oil has fallen more than $100 from a record peak of over $147 a barrel in July, as the global economic downturn hits demand for fuel. It settled at $33.87 a barrel on December 19, the lowest level since February 10, 2004.

(Additional reporting by Jennifer Tan in Singapore; editing by William Hardy)