Demand Concerns Slam Commodity Complex

Commodity prices plummeted Wednesday after a bearish oil and gasoline inventory report ignited fears high prices were cutting demand.

The U.S. dollar, which climbed 0.91% against a basket of world currencies, was also putting selling pressure on the commodities complex.

Wholesale gasoline prices have been particularly volatile in the last several trading sessions. Gas futures tumbled 9% last week, then made an astonishing 9.4% comeback in the last two days before plunging today.  RBOB gasoline for June delivery was recently off 20 cents, or 6%, to $3.17 a gallon.

The volatility is "very, very high" said Olivier Jakob, managing director at Swiss-energy analytics firm Petromatrix, adding he hasn't ever seen a period this tumultuous before.

The price moves were so dramatic, in fact, that the CME Group halted trading in crude oil, heating oil and RBOB gasoline on the electronic Globex exchange for the first time in two years.

Gas futures hit their 25-cent daily price limit at 12:06 p.m. ET, triggering so-called circuit breakers that are designed to prevent panic selling or buying, which also automatically stopped trading on the other two energy futures. Trading resumed at 12:11 p.m. with the daily trading limits doubled on all three contracts.

Gasoline inventories were up 1.3 million barrels to 205.8 million in the prior week, according to the Energy Department, a much larger gain than the 200,000 barrel build analysts were expecting. Moreover, gasoline demand is now down 2.4% from the same month last year.

"The risk on demand erosion/destruction remains" in the gasoline market, Jakob wrote in a note, especially considering gasoline prices haven't fallen nearly as quickly as crude oil prices.  Indeed, oil tumbled 15% last week whereas gas only lost 9%.

Oil fell $2.21, or 2.2%, to $101.57 a barrel following the inventory report.  Crude inventories jumped 3.8 million barrels to 370 million, far more than the 1.4 million increase Wall Street was expecting.  Stocks at Cushing, Oklahoma, where the benchmark crude that trades on the New York Mercantile Exchange is delivered, also increased 1.1 million barrels to 41.6 million.

Recent data have shown stocks at Cushing are hovering about all-time highs, indicating concerns that supplies of crude would slip as a result of geopolitical tumult in the Middle East and North Africa largely haven't come to fruition.

In the metals markets, silver has struggled considerably on the day, following energy futures lower. Silver recently slipped $1.71, or 4.4%, to $36.78 a troy ounce. The metal fell 27% last week on fears slowing global economic growth would crimp demand and the CME Group's dramatic hike in margins.

Silver made a minor recovery at the beginning of the week, but has since fallen back close to the lowest levels since Monday morning.

Gold, which has been considerably more stable, recently fell $7.80, or 0.51%, to $1,509.