Oil prices tumbled sharply, leading many commodities lower on Tuesday, after Goldman Sachs suggested investors should take profits and amid worries that higher energy costs could drag on the global recovery.

Raw materials from Brent crude to wheat, cotton and metals fall in unison, paring strong gains made since mid-March on lost oil output in Libya and steep falls in agricultural stocks.

Dealers reacted to growing concern that higher raw materials costs would begin to eat into demand and affect the pace of economic recovery. The International Energy Agency had reported that high oil prices had begun to dent consumption growth.

The benchmark Reuters-Jefferies CRB index has declined 2.6 per cent from a 2½-year high reached on Friday. ICE May Brent, the European oil benchmark, fell $2.78 to $121.20 per barrel, with losses snowballing from a $2.67 fall on Monday.

Nymex May West Texas Intermediate crude fell $3.44 to $106.48 per barrel.

Traders said a bearish note from commodity analysts at Goldman, which houses Wall Street's leading commoditydealer by revenue, provided the selling trigger for markets that had risen too far too fast.

"One big shop talks about taking profits or crude backing up, and every speculator takes their lead across all commodities. This is what you have as a result: a big red screen," said Andy Ryan, a cotton broker with FCStone in Nashville. ICE May cotton dropped 2.4 per cent to $1.9976 per pound.

Goldman's note had already pressured oil prices on Monday, and the selling spread to other commodities on Tuesday.

CBOT May corn, which has surged to records on tight supplies, fell 2.6 per cent to $7.56¼ per bushel. CBOT May soyabeans dropped 2.8 per cent to $13.30¼ per bushel and CBOT May wheat slid 5.1 per cent to $7.57½ a bushel.

"Crude is the linchpin of all the commodity markets. It's fairly highly correlated in varying degrees to the other commodity markets. It's a big undertow today," said Richard Feltes, vice-president at futures brokers RJ O'Brien in Chicago.