Oil surges 85% in May, posting its best month on record (XLE)

Reuters

• WTI crude oil spiked 85% in May, notching its best monthly performance gain on record, according to data from Bloomberg.
• The surge in oil prices comes just one month after oil prices went negative for a brief period of time, as demand for oil plummeted amid the economic shutdown caused by the COVID-19 pandemic.
• Fast forward a month later, and signs of bottoming economic data suggest investors are willing to bet that demand for oil will bounce back as well.
• While crude oil prices surged nearly 90% in May, energy stocks jumped only 2.5% for the month, as measured by the SPDR Select Sector Energy ETF.
• Visit Business Insider's homepage for more stories.

WTI crude oil spiked 85% in the month of May, marking its best monthly performance on record, according to data from Bloomberg.

The previous monthly record for oil was in September 1990, when the commodity jumped 44.6%, according to Bloomberg.

The surge in oil comes a month after the commodity turned negative for the first time ever, as investors were spooked by a surge in supply and a drop in demand for oil amid the coronavirus pandemic.

Now, investors seem to be betting that demand for oil will bounce back as the economy begins to show initial signs of a recovery.

Despite oil's massive jump in May, the commodity is still down 42% year-to-date.

And while oil surged, energy stocks didn't. 

Read more: A Wall Street firm studied every crash over the past 100 years - and concluded that the unusual performance of 7 tech stocks is masking the risk of a prolonged meltdown

Compared to the 85% surge for oil, energy stocks, as represented by the SPDR Select Sector Energy ETF, jumped only 2.5% for the month of May.

The disconnect between the performance of the commodity and the energy stocks may have something to do with the increased balance sheet risks associated with the over-leveraged energy sector.

NOW WATCH: How waste is dealt with on the world's largest cruise ship

See Also:

• GOLDMAN SACHS: These are the 20 stocks hedge funds piled into most aggressively last quarter — and history suggests they're set for big gains
• A Wall Street chief strategist analyzes 4 recessions throughout history to explain why investors should still be buying stocks — even as the economy hurtles into depression
• Bill Miller and 5 longtime value investors share 10 stock picks they're betting on right now — and explain why these are the best companies for the crisis recovery