What happened

Shares of the biggest oil stocks are moving higher on July 21. At 1:14 p.m. EDT, shares of Chevron (NYSE:CVX)ConocoPhillips (NYSE:COP)ExxonMobil (NYSE:XOM), and Royal Dutch Shell (NYSE:RDS.A)(NYSE:RDS.B) were up between 4% and 7.3%. Today's move higher is the result of several pieces of positive news that are lifting oil prices to the highest levels since early March. At this writing, West Texas Intermediate crude futures are $41.73 per barrel, up 2.3%. 

There are two things primarily responsible for today's bullish sentiment for oil and oil stocks: yesterday's positive news about a coronavirus vaccine candidate and today's breakthrough agreement by the European Union on a $2.1 trillion economic stimulus package. 

Pipelines going to an oil refinery.

Image source: Getty Images.

So what

The oil market has been crushed this year by two events: Saudi Arabia and Russia deciding to flood oil markets in a war for market share in March and the sudden onset of the coronavirus pandemic quashing global oil demand. 

In the four and a half months since, oil producers have struggled to cut output to match the massive demand destruction as global travel and economic activity have plummeted. And while oil prices have improved from the lowest point, demand is still down by double digits as the world's biggest economies struggle to return to normal in the middle of the first truly global pandemic in a century. 

Today's announcement from the EU could help offset some of the lost demand, providing economic stimulus to consumers and businesses that would likely result in at least some increase in demand for transportation fuel and energy in one of the world's biggest markets for oil companies. 

Yesterday's news that a vaccine being developed by AstraZeneca is reporting positive results and minimal side effects in early trials is another big positive. It's almost impossible to overstate the importance of a more permanent solution to COVID-19. Economic stimulus can only bridge the gap for so long. 

Now what

Today is a rare good day for big oil stocks this year, and on a real near-term positive in the form of the EU's stimulus agreement. For the prospective coronavirus vaccine, investors should take a more balanced view. Vaccines take years to develop, not months. There are serious risks of side effects, and the only way to determine the safety of any drug, including vaccines, is via long-term human trials across a large number of people. So a full U.S. Food and Drug Administration (FDA) approval isn't likely to happen anytime soon. 

It's possible the FDA awards an emergency use authorization for one or more vaccine candidates, but with some limitations due to the lack of completed testing to verify both efficacy and safety. 

In other words, investors need to accept a large measure of uncertainty and invest with the likelihood that COVID-19 will be in our communities for longer than expected. As a result, the oil and gas industry is likely still a long way from a true recovery. After all, oil prices are still in the low $40s, and there remains a massive amount of excess crude in storage. 

Big oil is the safest place to invest in the oil patch, but that's not a guarantee that investors will make a profit so long as the COVID-19 pandemic is prevalent.