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Energy Is Leading in 2026—But Are the Oil Majors Cracking?
Submitted by Jordan Chussler. Publication Date: 2/9/2026.
Article Highlights
- Energy is leading the S&P 500 this year with an 18% gain as investors vacate tech in search of defensive sectors.
- So far, the oil majors have reported mixed Q4 2025 earnings, resulting in uncertainty about the sector’s ability to sustain its market-leading gains.
- Long term, production forecasts and an increasing supply-demand gap are bullish for Big Oil, and the Energy Select Sector SPDR Fund should mirror that growth.
Entering 2026, forecasts for the performance of the energy sector were muted, with analysts pointing to a global oil surplus and weaker demand. After mustering an 8.7% gain in 2025—good for fourth-worst among the S&P 500's 11 sectors—expectations for the sector remained low heading into this year.
But as the market rotates out of tech stocks, defensive sectors have benefited from investors' flight to safety. Chief among them is energy, which has led the index with a year-to-date (YTD) gain of more than 18%.
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Discover how to invest in the fund Trump uses to collect this income >>That leadership has prompted scrutiny. With four of the oil majors reporting Q4 2025 results over the past two weeks, questions are emerging about whether the sector can sustain its market-leading gains.
The Oil Majors' Mixed Earnings Are Raising Some Eyebrows
Beginning Jan. 30 with ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX), and followed by ConocoPhillips (NYSE: COP) and Shell (NYSE: SHEL) on Feb. 5, the integrated Big Oil companies delivered mixed results.
Chevron reported an earnings-per-share (EPS) beat of $0.08 but missed revenue expectations by about $2.39 billion. ExxonMobil beat on both the top and bottom lines, while ConocoPhillips and Shell missed on EPS and revenue.
Shares of COP and SHEL fell more than 2% and 5%, respectively, on Feb. 5 after those misses. That drop erased Shell's YTD gains; ConocoPhillips remains up nearly 9% YTD, while ExxonMobil and Chevron are up roughly 19% and 15%, respectively.
But earnings are backward-looking; investors typically pay more attention to forward guidance.
Chevron is forecasting roughly 10% compound annual growth rate (CAGR) for cash flow from operations and about 10% production CAGR in 2026. The company says that should generate roughly $12.5 billion of additional free cash flow by year-end.
ConocoPhillips is targeting a combined $1 billion reduction in capital expenditures in 2026, while Shell aims to cut operating costs by $1 billion this year.
On ExxonMobil's Q4 earnings call, CEO Darren Woods said the company's product solutions business is "strengthening the portfolio with advantaged project startups and high‑value product growth…projects [that] are expected to drive meaningful earnings growth through 2030, with 60% coming from assets already online."
Woods added that ExxonMobil's "growth trajectory remains robust, and we expect to exceed 2.5 million oil‑equivalent barrels a day beyond 2030."
Macro Factors Driving Energy's Rebound Remain in Place
Beyond cost and production initiatives, several macro factors are supporting the sector.
On Feb. 5, the U.S. Energy Information Administration (EIA) reported that natural gas stocks in the lower 48 states saw their largest reduction in more than a year, driven by Winter Storm Fern and a subsequent spike in heating demand.
The EIA noted that natural gas consumption in the residential and commercial sectors from Jan. 23–26 was, on average, 29% higher than the five‑year average for those dates.
Meanwhile, the U.S. Bureau of Labor Statistics' December Consumer Price Index data showed 10.8% year‑over‑year inflation for utility gas services.
For oil, the International Energy Agency (IEA) expects global demand to average about 930,000 barrels per day in 2026, up from roughly 850,000 barrels per day in 2025.
Looking farther out, in its 2026 investor presentation, Chevron highlighted how—despite the industry grappling with a global supply glut—the gap between supply and demand is projected to widen through 2035, when it ultimately reaches 50 million gallons per day, with demand rising across sectors.
The XLE Offers Broader, Lower‑Risk Exposure to Energy
For buy‑and‑hold investors, the individual stocks mentioned above can be suitable choices. For those preferring broad exposure, the Energy Select Sector SPDR Fund (NYSEARCA: XLE) offers a diversified basket of leading oil and natural gas producers.
Its top-five holdings include ExxonMobil, Chevron, ConocoPhillips, SLB (NYSE: SLB)—formerly Schlumberger—and Williams Companies (NYSE: WMB).
So far this year, the fund is up more than 14% and carries a modest expense ratio of 0.08%.
The ETF has attracted significant institutional interest: institutional owners have injected nearly $13 billion into XLE over the past 12 months, compared with outflows of about $2.37 billion.
Short interest is notable at 12.45% of the float. That level of bearish betting can create volatility, but for long-term investors a healthy exposure to the energy sector via XLE should still benefit from the macro tailwinds described above.
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