Crude oil prices are on the rise on Nov. 3, with both West Texas Intermediate and Brent crude futures up more than 2%. Oil prices are rising today along with equity markets, with the S&P 500 and Dow Jones Industrial Average up more than 1.6%, as some market speculators bet on a Democratic sweep of the U.S. Presidency and both houses of Congress that would likely lead to a substantial economic stimulus package. Economic stimulus would help the U.S. avoid a potential "double-dip" recession, as cases of COVID-19 move sharply higher heading into the autumn. 

Today's optimism despite a backdrop of uncertainty

For oil, the move higher today is a bet on a source of stimulus that could prove of little benefit to oil prices. The U.S. is one of the biggest oil consumers in the world, but COVID-19 cases are on the rise around the world.

Oil worker on a pumpjack.

Image source: Getty Images.

In Europe, countries are locking down activities that can lead to increased spread in an attempt to curb the recent explosion of cases of the deadly disease. While leaders hope that the lockdowns will be much shorter in duration this time than they were in the spring, the impact on economic activity -- including oil demand -- is likely to be significant. 

Despite today's move higher, oil prices are still far below year-ago levels. The key U.S. West Texas Intermediate benchmark price was still below $38 per barrel, while Brent, the trading price for North Sea oil that influences much of the global oil trade, was still under $40 per barrel. 

Global oil heavyweights feel enormous pinch on their revenues

The U.S. Energy Information Administration recently projected that OPEC, the cartel that controls a massive amount of global supply, will see combined net oil export revenues of about $323 billion in 2020. If those estimates hold true, the OPEC nations, all of which count on oil to fund an outsize portion of their GDP, will earn almost half as much from oil sales this year than in 2019. 

OPEC+, the group that includes Russia, is already prepared to take steps to help stabilize prices. The group has increased oil output once this year after reaching a landmark deal to cut almost 10 million barrels per day from their combined output. The next leg up in output is set for early 2021, but the cartel is facing a global market that may not have any appetite for more crude. 

The risk for oil stocks remains high 

The oil patch has easily been the worst-performing sector of stocks this year: 

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^SPXNRGS data by YCharts

Global oil demand has fallen to the lowest levels in more than a decade, and the resurgence of the coronavirus pandemic could lead to another leg down after a modest recovery during the summer. 

There remains enormous risk for oil stocks. The petro-states that control most of the world's oil reserves and output are unlikely to allow U.S. producers to retake market share so long as global demand remains below 2019 levels. These countries count on oil revenues too much to fund their governments to just roll over. Moreover, oil giants, including Saudi Arabia, have an enormous cost advantage against U.S. shale and have already proven willing to use that pricing power to gain oil market share in the U.S. 

Oil giant ExxonMobil (NYSE:XOM) just reported its third-straight quarterly loss for the first time ever. In addition, the energy giant announced that it will cut almost 2,000 more jobs and that it may have to write down the value of some of its assets by billions of dollars. As a result, the board didn't increase the dividend this quarter, breaking an 18 year streak of annual payout increases. 

And while Exxon has the balance sheet strength and the diversified operations to ride out a continued downturn, many of its peers aren't strong enough to survive a second-wave oil downturn. That's not necessarily true for many oil companies that operate exclusively or primarily in the U.S. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.