LONDON/SINGAPORE: Oil fell by more than $2 on Monday as most commodities began the third quarter in the red, weighed down by weak factory data from China and Europe as well as doubts over an EU deal that had fuelled the market's biggest rally since 2009.
Corn defied the slump, rising more than 4 percent at one point to a 9-1/2-month high, as a worsening US drought put harvests in doubt, extending the rally in new-crop December corn after its record near-15 percent surge last week.
Wheat also jumped to levels unseen since last September, but other commodities gave back part of Friday's steep gains after data showed China's manufacturing activity hit a seven-month low in June, heightening worries that the health of the global economy was deteriorating.
In Europe, business surveys showed euro zone manufacturing took another hefty blow in June and factories were preparing for worse to come.
"We've got a heavy week of economic data across the world and we didn't start well, so markets are going to be a bit nervous," said BNP Paribas analyst Stephen Briggs in London.
The fall in most commodities prices underscored the fragility of commodity markets, which on Friday staged their biggest one-day gain since March 2009 after euro zone leaders said they would allow their rescue fund to inject aid directly into banks from next year, and moved to stabilise bond markets.
The Reuters Jefferies CRB index, a benchmark comprised of 19 commodities, jumped 4.6 percent on Friday.
"I suspect markets are going to look again at what was agreed on Friday with the euro zone, and the risk is they will conclude that this isn't the silver bullet and a lot more needs to be known," Briggs added.
A firmer dollar also weighed on commodities priced in the US currency as the euro dipped.
OIL, METALS HIT BY DOUBTS
Worries about the world economy hit oil, sending Brent crude down as much as 2.6 percent to a low of $95.30 a barrel. US oil lost 2.1 percent to $83.16, after both posted their fourth-largest daily gains in dollar terms on Friday.
A European Union oil embargo on Iranian oil shipments, which took effect on Sunday, could lend some support to prices, but analysts said the grim global macroeconomic picture was likely to cap any possible gains.
Oil could also find some support from a strike by Norwegian offshore oil workers, which entered its second week on Sunday.
Labour unions say they are bracing for a long conflict and possible escalation to further lower output from the eighth-largest oil exporter.
Industrial metals also felt the chill as copper dropped as much as 1.0 percent to a low of $7,604.75 a tonne, after jumping more than 4 percent on Friday, its steepest rise since late November.
Aluminium shed 0.9 percent to a low of $1,898 a tonne.
"The latest China PMI data has dampened sentiment, underlining how fragile the global economy is," said Orient Futures derivatives director Andy Du.
China is the world's top copper consumer, and a Chinese slowdown has made it difficult for investors to push up copper strongly, even from prices which hit six-month lows last month.
Spot gold moved lower with other higher-risk assets, slipping 0.5 percent to a low of $1,588.49 an ounce after surging 3 percent on Friday.
Prices held just below their 50-day moving average at $1,599 an ounce, having failed to gain traction above $1,600.
CORN EXTENDS RALLY
Bucking the weaker trend, corn led US grains higher, with the December contract on Chicago Board of Trade jumping 4.6 percent to a session peak of $6.64 a bushel, before trimming gains to $6.52, up 2.7 percent.
Extreme heat and dryness is hurting the US corn crop at its crucial pollination phase, a situation weather forecasters expect to continue this week, with only small amounts of rain seen for drought-plagued Indiana and Ohio.
Chicago September wheat gained 0.9 percent to $7.64-1/4 a bushel, after touching a 9-1/2-month top of $7.74-3/4, tracking corn higher on prospects of higher volumes being channeled into animal rations, given the tight global supply of corn.
Soybeans rose 1 percent to $14.42, with harvests also threatened by the US drought.
In softs markets, raw sugar futures firmed, underpinned by news that speculators had raised their net long position, while coffee touched a one-month high, buoyed by concerns over the impact of rains in Brazil on the crop.
Cocoa futures were little changed, supported by a slow start to the mid crop in West Africa, the world's top cocoa growing region.
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