The CME Group raised margin requirements on oil futures for May 10 for the fourth time since February to $6,250 per contract. In response, oil futures plunged more than 5 percent to $98.5 per barrel on May 11.

Something similar happened to silver futures last week, which plunged 9 percent last Monday on one margin rate hike and 11 percent last Wednesday on an additional hike.

For oil, the key question is if it’ll suffer a similar fate as silver and embark on a vicious multi-day plunge.

Oil and silver have a lot in common. Prior to last week, they both saw tremendous rallies that took their prices beyond fair value. Moreover, it was speculators in US financial futures that drove up their prices.

The raising of margin requirements, therefore, had a huge impact because of the important roles speculators played in the rally. Moreover, as prices fell, many of them were forced to sell or liquidate positions to meet margin calls, thereby fueling self-reinforcing cycles of declines.

The self-reinforcing cycles also spilled across the commodities futures complex because many speculators had positions in multiple commodities markets. So to raise cash for losing positions in one market, they were forced to sell futures in another one.

The whole commodities complex in financial futures, therefore, has been pressured by silver and now oil.

The sell-off in oil, however, probably won’t be as bad as the one in silver. In 2011, the speculative frenzy in oil was not as big as silver’s. Moreover, oil’s rise was at least partly based on real economic factors such as demand from emerging market countries and fears about supply disruptions in the Middle East and North Africa.

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