RTRS: COMMODITIES-Oil, copper pare gains after Spanish rescue
* Copper, oil surge initially, then retreat from highs
* Dollar wilts after EU agrees to lend to Spanish banks
* Markets nervous ahead of Greek elections
* China data shows surprise jump in commodity imports (Adds quotes, updates prices)
By Eric Onstad and Manolo Serapio Jr
LONDON/SINGAPORE, June 11 (Reuters) - Oil and metals gained on Monday after Europe threw Spanish banks a lifeline, but investors were wary that a rescue package of up to $125 billion was only a temporary solution to a wider euro zone debt crisis.
Markets such as oil and copper gained strongly in Asian trading after a weekend deal to help Spanish banks hit by a collapse in the property sector, but most prices soon came off their highs and gold dipped into negative territory.
"I hate to be the one who ruins the party, but all this is doing is once again papering over the cracks in the dam and not addressing the root issues," said David Govett, head of precious metals at Marex Spectron in London.
"If they don't follow up the Spain rescue with additional steps to establish a stronger fiscal framework, I don't think this response by markets is going to be sustained," said Thomas Lam, chief economist at DMG & Partners Securities in Singapore.
Investors are nervous about a rerun of elections on June 17 in Greece, where leaders of the country's two traditional ruling parties warned on Sunday of political stalemate.
But commodities and other risky assets got a short-term boost after euro zone finance ministers agreed to lend Spain up to 100 billion euros ($125 billion) for its bank rescue fund, deflating the dollar and boosting the appeal of commodities priced in the greenback.
Also supporting commodities was weekend data showing China's imports of commodities including copper, crude oil and iron ore rose in May, defying expectations for a fall and suggesting demand from the world's major commodity buyer remained firm.
OIL PARES GAINS
Crude oil surged early in the day, also helped by news that talks failed between the U.N. nuclear watchdog and key oil producer Iran to unblock a probe into suspected atom bomb research by Tehran.
The International Atomic Energy Agency said no progress had been made in the Friday meeting aimed at sealing a deal on resuming the IAEA's long-stalled investigation.
Brent crude jumped 2.7 percent to a session high of $102.21 a barrel, but pared the gains to about 1 percent by midday in Europe.
U.S. oil had been on track for its biggest daily rise since April 2, hitting an intra-day high of $86.64 a barrel before pulling back to about $85 a barrel.
Benchmark copper futures on the London Metal Exchange had pushed up nearly 3 percent, its biggest gain in two months and rebounding from near six-month lows hit in the previous session.
It pulled back to gains of 1.5 percent, supported by Chinese data released on Sunday showing the country's copper imports rose nearly 12 percent from April to 419,741 tonnes.
"China's data over the weekend was very encouraging, defying the naysayers. Chinese copper demand is still lackluster but China does need imports and after running down inventories for some time, consumers have to import and restock," said Orient Futures Derivatives department director Andy Du.
Traders have said that a global buyer expecting higher prices in China in coming months had shipped a relatively large shipment of refined copper from the United States to Shanghai in late March, which could have arrived in the city in May.
Production data released on Monday showed China's refined copper output dropped 1.4 percent to a three-month low in May as some smelters undertook plant maintenance amid sluggish demand.
China also imported a record high 6 million barrels per day of crude oil and more iron ore last month, although analysts have warned against drawing excessively optimistic conclusions, as actual demand from users remained weak and the bulk of oil and copper shipments was likely to have been moved into storage.
GOLD DIPS INTO RED
Gold reversed direction as investors sold the metal when it popped back above $1,600 per ounce, wary about last week's sharp price drop.
"A bailout for the European banks is a positive for the euro and in a way a positive for gold, but it may take some of the risk attraction of gold away, so there is some negativity there as well," Mitsui Precious Metals analyst David Jollie said.
Spot gold shed about $2 to about $1,591 an ounce, off a session high of $1,607.95.
Other precious metals with industrial uses held up better. Platinum rose about 1 percent and palladium added nearly 2 percent, tracking industrial metals.
In agriculture markets, Chicago corn futures were slightly firmer, staying close to a two-week high hit on Friday on dry weather concerns but with looming U.S. government crop estimates encouraging caution in the market.
Wheat and soybeans rose on relief at the deal to shore up Spain's banks, although gains were capped by some position-squaring before Tuesday's U.S. Department of Agriculture report on global supply-demand of farm products.
Raw sugar, coffee and cocoa futures on ICE also clawed higher after the Spanish bailout deal. (Additional reporting by Jan Harvey, Christopher Johnson and Maytaal Angel; Editing by Himani Sarkar and Alison Birrane)
