Another View on Oil

Updated from 8:23 a.m. EDT

Nigeria, Norway, Russia, Venezuela, Saudi Arabia, Iraq -- investors need an atlas and a shortwave radio to keep track of all the potential trouble spots for oil supplies right now.

On Tuesday, the president of OPEC said there was no more readily available supply to be put on the market, driving prices up, only to be contradicted by an unnamed Saudi official who told Dow Jones that the kingdom could add 1 million barrels a day. Prices fell, but then rose again on news that the Russian government was expanding its tax probe of OAS Yukos, the country's largest oil producer.

The risks and confusion have put unrelenting upward pressure on black gold. Futures prices closed above $44 a barrel on Tuesday for the first time in the 21-year history of the New York Mercantile Exchange's widely followed crude contract. It was the third record close in the past week and marked a 40% gain over the past year.

There was no relief Wednesday. Nymex crude rose 13 cents to $44.28, another record.

Crude's rise is killing stocks, especially those trading on the Nasdaq Composite, which has traded inversely to oil for much of 2004. On Tuesday, the Comp slumped 1.7% while the Dow Jones Industrial Average and S&P 500 each shed about 0.6%.

But I'll stake out the minority position and argue that oil is overbought. Once some of the noise settles down, expect prices to retreat (presumably to the benefit of equities). Futures due in the months beyond the current contract are already signaling that the market expects lower prices ahead. Yesterday October crude ended at $43.66 and November at $43.14. The six-year future -- Federal Reserve Chairman Alan Greenspan's favorite measure, according to a speech he gave in April -- closed at less than $35. And speculative players in oil futures and options have been increasing their net long positions over the past month after paring them in June -- a contrarian indicator supporting a pullback.