XLE Surged 21.6% This Year as Oil Majors Navigate $64 Crude Reality

The Energy Select Sector SPDR Fund (NYSEARCA:XLE) has surged 21.6% year to date as markets pivot from energy transition rhetoric toward energy security concerns. This performance reflects investor confidence that the fund’s $33 billion portfolio of oil majors can navigate volatile crude prices and deliver returns even when commodity markets remain unpredictable.

The Oil Price Equation

WTI crude has climbed 9.1% over the past month to $64.53 per barrel, a move that matters because it keeps integrated majors profitable despite projections of lower prices ahead. Three factors are preventing a collapse into the low $50s: China’s strategic reserve buying, geopolitical supply risks, and stronger-than-expected summer demand.

At $65, integrated majors like Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) generate solid cash flow but face earnings pressure. Analysts note both companies can support dividends and capital programs even if oil falls to $50 per barrel, thanks to low-cost assets in the Permian Basin and offshore Guyana. The test comes if prices drop below that threshold or spike above $80, where upstream economics improve dramatically but inflation and demand destruction risks rise.

Track WTI prices through the Federal Reserve Economic Data platform, which publishes daily spot prices. Monthly EIA inventory reports provide supply and demand context. When crude moves more than 10% in either direction over a sustained period, XLE holdings will feel it in quarterly reports.

Concentration and the Majors

XLE’s structure creates concentrated risk because Exxon and Chevron represent 42.5% of the fund, meaning their quarterly results drive returns more than the other 23 holdings combined. Both recently reported earnings declines as lower oil prices compressed margins, though Exxon still posted net income of $6.5 billion. The fund’s low portfolio turnover means this concentration persists by design, making the majors’ ability to maintain shareholder returns during weak upstream economics the critical question for investors.

Check quarterly earnings releases from Exxon and Chevron, typically published in late January, April, July, and October. Focus on realized prices per barrel of oil equivalent, production volumes, and free cash flow generation. When these two companies report weak upstream results, XLE will struggle regardless of what smaller holdings deliver. The fund’s 10% annual portfolio turnover means this concentration persists by design rather than temporary positioning.

The most important factor for the next 12 months is whether WTI crude stabilizes above $60 or breaks lower, while the key signal is whether Exxon and Chevron can maintain cash returns to shareholders despite compressed margins.