What happened 

Crude oil prices are on the move again today. West Texas Intermediate futures are up 24%, while Brent is up 6.6%. This has investors rushing back into oil-field services stocks, with W&T Offshore (NYSE:WTI)Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BKR) all posting double-digit gains in early trading on Wednesday, while Core Laboratories (NYSE:CLB) jumped almost 9%. 

Worker on an oil platform.

Image source: Getty Images.

So what

Today's surge is another case of traders chasing oil stocks higher on the upward momentum of crude oil prices. Year to date, this group of stocks has fallen between 50% and 67% as the oil industry has imploded. Investors are looking for any sign that the prospects for these companies are going to improve, while momentum traders are looking to earn some gains simply by buying stocks that often follow oil prices. These oil-field service stocks have certainly traded with crude prices so far this year (note the dark blue line representing Brent crude spot prices):

WTI Chart

WTI data by YCharts.

And oil is moving big today, so it's not a surprise to see these well-known oil stocks moving, too. But the oil industry is still in immense turmoil; that's why despite surging almost 10% in early trading, Baker Hughes stock is actually down in afternoon trading, along with Helmerich & Payne (NYSE:HP), which was also up more than 5% at one point and is down 1.1% at this writing. 

Now what

Let's apply a healthy dose of context to today's surge for these stocks. West Texas Intermediate, a key benchmark for U.S. oil, still trades for less than $15 per barrel even after surging more than 20%, while Brent, a major global benchmark, is still below $21 for June deliveries. The world is awash in a massive oversupply of oil, a result of the absolute collapse of oil demand as entire industries have been closed down to limit the spread of the deadly coronavirus

Moreover, even as the economy opens back up, oil markets will still be in a state of massive oversupply, and it's likely that global oil production could still be in excess of demand. Put it all together, and few subsectors of the oil and gas industry are as exposed to the downside as these companies. They rely on oil producers, which contract them to do much of the work to develop and bring oil production on line, and that sort of work is going to be in very low demand for at least the remainder of 2020 and potentially well into 2021. 

There will be opportunities to profit in oil stocks, but until the picture becomes more clear on what the recovery looks like, investors would do well to avoid most of the sector, and especially oil-field service providers like the companies above.