What happened

Oil giants are surging today. The S&P 500 is up about 7.4%, and many supermajors are up double-digits, with some pushing 20% in gains today: 

Oil Stock Price Change on 3/24/20
BP (BP -0.61%) 19.9%
Chevron Corporation (CVX -0.94%) 18.2%
ConocoPhillips (COP -0.67%) 20.2%
ExxonMobil Corporation (XOM -0.81%) 9%
Royal Dutch Shell (RDS.A) (RDS.B) 18.3% and 19.9%
Total SA (TTE -1.02%)  11.8%

As of 3:09 p.m. EDT. Data source: Yahoo! Finance.

So what

Today's huge surge is a product of a few things. First, the overall market's positive move is driving oil stocks higher, as investors count on Congress to reach an agreement on as much as $2 trillion in economic stimulus to businesses and individuals to help soften the blow from what looks like it will be a sharp fall into recession

In addition to government efforts to support an economy in free fall, the U.S. Federal Reserve has pledged to act aggressively to support the private bond market. This is a massively important move for the energy sector, which utilizes substantial amounts of debt to fund operations, and is probably the most at risk of seeing private lenders pull the plug, particularly in lending to shale-focused oil producers. 

oil barrel and pumpjack paperweights on top of cash.

Image source: Getty Images.

There have also been rumors that the U.S. and Saudi Arabia are in talks to form a partnership to help stabilize oil markets. The U.S. Secretary of Energy acknowledged in an interview that this is an idea that's been floated. 

Add it all up, and investors are flooding capital back to what is seen as the most stable, safest part of the oil and gas sector: Massive, integrated companies with strong balance sheets and multiple ways to make money in the oil and gas business. 

Now what

Let me be as blunt as possible: It's very unlikely that the U.S. and Saudi Arabia will form an oil cartel. The reality is, between individual property and mineral rights, and hundreds of companies controlling America's oil reserves -- not the federal government outside the oil reserves on federal lands -- it would be immensely difficult to accomplish, and possibly not even legal. 

Moreover, investors need to be very conscious of the reality with oil markets today: This little bit of optimistic news doesn't do much to change the very real problems that the sector faces. In the weeks and months ahead, global oil markets are on track to become even more oversupplied than we have seen. Storage facilities are going to be overrun, even when factoring in the use of offshore tankers to serve as temporary storage. 

In other words, there very well could be far more pain to come, and investors need to act with that likelihood in mind. Today's huge gains could -- and likely will -- get wiped out in the weeks to come as the headlines change and reflect the coming glut of oil. That could send crude prices down even further from today's $27 per barrel for Brent crude and $23.90 for West Texas Intermediate, prices that simply won't pay the bills for even the best-capitalized oil major. 

That's not to say oil supermajors like the companies above (at least the integrated ones, meaning all but pure-play producer ConocoPhillips) should be avoided. I expect today's prices will look like fire-sale deals in a few years, once the economy and oil markets return to normal.

But there's a very good chance the next few months could be brutal. Invest accordingly.