What happened

Shares of Oceaneering International (OII 1.02%) rallied more than 12% by the close of trading on Tuesday. Fueling the oil stock was growing enthusiasm in the oil market as crude prices continued climbing. With today's jump, Oceaneering International is up more than 40% so far in 2021, boosted in part by a big rally last week. 

So what

Crude oil prices continued their recent rebound today. WTI, the primary U.S. oil benchmark, rose more than 1.7%, closing above $53 a barrel. Meanwhile, Brent, the global benchmark, added another 1.6%, closing above $56.50 a barrel. That pushed crude oil to an 11-month high. 

Oil platform and tanker ship in offshore area at sunset.

Image source: Getty Images.

The main factor raising oil prices was investor enthusiasm that supplies will tighten, causing inventory levels to decline, thanks in part to recent efforts by Saudi Arabia to curb more of its output. Analysts believe that U.S. inventory levels, which the government will report tomorrow, should drop for the fifth straight week. 

This rising tide of higher prices is lifting all boats in the oil market. That's because it will enable oil producers to generate more cash, giving them more flexibility to sanction new capital projects. As they do, it would benefit Oceaneering International since it should secure more service contracts. 

Now what

While Oceaneering International has won more than $250 million of new and renewal contracts since the end of the fourth quarter, the oil industry faces a long road to recovery, especially offshore, which is Oceaneering's focus. Because of that, it could be awhile before its results start improving since the industry will likely hold back expansion projects until the oil market is on a firmer foundation. That uneven recovery could cause its shares to be very volatile this year.