Oil's Slippery Slide

It's kind of funny, as oil prices have gone from one new high to another speculators have been cited as the root cause for the gains. Yet on oil price pullbacks, supply/demand factors get the credit. Our take is that it's a little of both and mainly the latter.

Since peaking just a few short days ago above $147 a barrel, crude oil has plunged nearly $18 a barrel or 12 percent. It's hard not to point a finger at speculators when we see that kind of action since the fundamental picture hasn't changed markedly. But we don't hear anyone cheering the speculators today.

To be sure, geopolitical tensions have eased somewhat with the U.S. State Department's plans to establish an office (although not full diplomatic relations) in Tehran .

That allows investors to breathe a little easier in the hopes that a peaceful solution will be found to Iran's nuclear ambitions. Personally, I think it is more political posturing and not likely to last either. The powers-that-be are still as confrontational as ever.

We've been thinking for some time the energy market is due for a much needed correction in an on-going bull market. We're getting that now. In a presidential election year and less than four months from election day, it wouldn't surprise us if "miraculously" fuel costs drop even further.

Once that correction has run its near-term course, though, look for prices to start climbing again. The fundamentals in the U.S., which are often blamed as a threat to commodity prices, aren't all that bad. Once the elections are over, the fundamentals get factored in once again.

And China's economy continues to expand at a better than 10 percent pace while global growth is running above 4 percent, suggesting that any slowdown in demand from Western economies will quickly be snapped up somewhere else. That, by the way, is probably why silver and copper prices have held up so well while oil and natural gas swooned.

What a great time this is for buyers of Freeport-McMoran (NYSE:FCX), Silver Wheaton (NYSE:SLW), Silver Standard Resources (Nasdaq:SSRI) and oil/natural gas producers like Range Resources (NYSE:RRC), all of which we did some purchasing of today during this summer shopping season.