At the New York Mercantile Exchange, the platinum group - which soared to new highs last week on fears that Russia was once more playing cat and mouse with its shipments in order to boost prices - eased after Japanese traders said on Monday that a new supply pact with Russia was imminent.

The traders said the first Russian shipments could arrive by late August. Russia accounts for a fifth of world platinum supplies but two-thirds of palladium, which is highly valued by automakers for use in air pollution devices. Both metals are also used in electronics and jewellery making.Reacting to the news, NYMEX palladium for September delivery closed $43.35 an ounce lower at $738.40, a drop of 6 percent. October platinum fell $8.60 at $564.20.

The benchmark palladium contract is now down $120 an ounce from the record high at $859 set last Wednesday on concern that supplies that began to arrive early this summer were drying up as Russia haggled for higher prices. Platinum hit 12-year highs last week on the back of palladium's rise.Many traders remained sceptical that Russia would start shipping after months of mixed signals and sporadic exports.

"The market is kind of anticipating that finally we will get something," said William O'Neill, head of futures research at Merrill Lynch. "But still, it's a seeing-is-believing situation as far as this market is concerned."Record demand for palladium from the booming auto industry was seen as still supporting prices even if Russia ships more.

"It's still a tight market and it's going to continue to be tight," O'Neill said. "But is tight worth $850? $750?" Oil prices also dropped sharply, with heavy selling by speculators to cash in profits made in last week's sharp rally. Those gains had been triggeredy supply worries as well as various maintenance and downtime interruptions at refineries.

At the NYMEX, crude oil for September delivery closed $1.05 lower at $28.91 a barrel. September heating oil ended 3.64 cents a gallon lower at 78.21 cents and September gasoline was 2.79 cents a gallon lower at 84.80 cents.Traders tied some of the profit taking to weekly industry oil inventory data to be issued on Tuesday night. Last week's rally was fuelled in part by a nine-million barrel drop in U.S. Crude stocks as reported by the American Petroleum Institute. Traders had been expecting a rise of one million barrels.

The market's weakness continued to be underpinned by doubts about the amount of OPEC output and whether Saudi Arabia would keep increasing its shipments this month as traders said it did last month in an effort to control runaway oil prices.

U.S. Energy Secretary Bill Richardson said on Monday he has had "constructive" talks with Saudi Arabia on oil output but it was too early to tell if the Saudis will increase oil exports.

At the Chicago Board of Trade, beneficial weekend rains in the Corn Belt and forecasts for more crop-enhancing weather this week pushed prices to fresh life-of-contract lows.

Soybeans for September delivery closed 3-1/2 cents lower at $4.37-1/4 a bushel and September wheat fell by the same amount to $2.33-1/2, both after touching new lows for the season. Corn for September delivery closed one cent lower at $1.77-3/4, just above the existing contract low. (Reuters)Meteorologists said on Monday that a brief spell of hotter, drier weather was likely in the U.S. Midwest beginning this coming weekend and ending early next week. But traders shrugged off the mild threat to yields, in part because most corn has already pollinated and soybean pod-filling is also advanced.

"There was really nothing supportive in the outlook. We're going to have rains right up until the hotter weather so that's not much of a weather threat. It's almost greenhouse conditions in my mind," said analyst Shawn McCambridge at Prudential Securities.