Brent crude oil fell to $96 a barrel on Monday after weak data from Europe and Asian economies including China, the world's top energy consumer, deepened concerns that the world economy is deteriorating. Worries over the euro zone crisis also pressured oil as enthusiasm faded over an European Union bank bailout deal, which on Friday had helped crude to its fourth-biggest daily gain on record. Finland and the Netherlands added to fears over the fragile nature of the agreement by saying they would block a key element of a deal that would have allowed the euro zone's new permanent bailout fund to buy bonds in the market. The impact of a European Union embargo on Iranian oil shipments, which took effect on Sunday, was overshadowed by the grim global macroeconomic picture, analysts said. Brent crude [LCOCV1 96.55 -1.25 (-1.28%) ] fell $1.72 to a low of $96.08 a barrel before recovering to around $95.90. U.S. crude [CLCV1 83.79 -1.17 (-1.38%) ] shed $1.40 to a low of $83.56. On Friday, Brent crude rose more than $6 a barrel, while U.S. crude jumped by more than $7, their fourth-largest daily gains in dollar terms since the contracts were launched. "Oil is being driven by psychological factors," said Eugen Weinberg, global head of commodities research at Commerzbank in Frankfurt. "Today's selloff is a natural reaction after such enormous gains at the end of last week." Friday's gains reflected optimism an agreement to strengthen European banks and cut borrowing costs for Italy and Spain would reduce the risk of a euro zone break up. But that positive sentiment was tempered by data on Monday showing factory activity slowing in many key economies. Euro zone manufacturing took another downturn in June and factories are preparing for worse, according to business surveys showing jobs cut at the fastest in two-and-a-half years. The survey showed factories in Germany and France are succumbing to a downturn that started in southern Europe. Manufacturing in China, the world's second-biggest economy, also worsened in June with export orders, usually an indicator of global economic health and trade flows, posting their biggest fall since December. China is the world's second-largest oil consumer and any sharp slowdown there could have a significant impact on global oil demand growth. A firm U.S. dollar [.DXY 81.82 0.20 (+0.25%) ] and weaker euro also weighed on commodities priced in the U.S. currency. Oil could find some support from a strike by Norwegian offshore oil workers, which entered its second week on Sunday. Labor unions say they are bracing for a long conflict and possible escalation to further lower output from the eighth-largest oil exporter. This coincides with the EU ban on Iranian crude imports aimed at choking Iran's export earnings to try to force it to curb a nuclear program they fear includes weapons development. Tehran says it has no such plan. Iran dismissed the embargo saying it was fully prepared to counter the impact of sanctions with a $150 billion war chest of foreign reserves. Iranian oil exports slipped by 180,000 barrels per day (bpd)to 2.95 million bpd in June, according to a Reuters survey of sources at oil companies, Organization of the Petroleum Exporting Countries officials and analysts. That would be its lowest output since it produced 2.81 million bpd in 1989, according to figures from the U.S. Energy Information Administration. Iraq's oil exports dropped to 2.403 million bpd on average in June compared with 2.452 million bpd in May, the oil ministry said over the weekend.

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