Energy Sector Posts Third Consecutive Weekly Gain as XOM and CVX Hit Multi-Year Highs on $118 Oil

HOUSTON / NEW YORK — The energy sector extended its remarkable 2026 outperformance on Friday, with the S&P 500 Energy Select Sector ETF (XLE) posting a third consecutive weekly gain even as the broader market fell nearly 2% and all other sectors declined. Exxon Mobil (XOM) and Chevron (CVX) closed at their highest levels in nearly two years on Friday, while ONEOK surged an additional 2.3% following a bullish midstream throughput update that caught analysts off guard. The sector is now up approximately 34% year-to-date, in stark contrast to the S&P 500's double-digit year-to-date loss.

The catalyst driving energy stocks continues to be crude oil's relentless climb, with West Texas Intermediate settling above $118 per barrel for the first time since September 2022. Analysts at TD Cowen pointed to three structural factors sustaining the rally: OPEC+ production discipline holding despite elevated prices, persistent Red Sea disruptions adding a $6 to $8 per barrel risk premium to Brent crude, and U.S. shale output growth disappointing consensus by approximately 200,000 barrels per day due to well productivity decline rates in mature Permian Basin acreage.

For Exxon Mobil specifically, the current price environment is generating extraordinary free cash flow. At $118 oil, Exxon's integrated operations are on pace to generate roughly $65 billion in annual free cash flow — a level that supports aggressive shareholder returns. The company confirmed last week that its $20 billion share buyback authorization for 2026 remains fully on track, and several analysts noted that Exxon could announce a special dividend by Q2 if oil remains above $100. The stock trades at just 12 times forward earnings, well below its historical average.

Chevron's recent Permian Basin and Kazakhstan Tengiz field production updates have also impressed. The Tengiz expansion, which had experienced years of delays and cost overruns, is now running ahead of its revised production schedule and contributing meaningfully to earnings. Analysts at Barclays raised their Chevron price target to $230, up from $195, citing the combined tailwind of higher oil prices and Tengiz production normalization as a powerful near-term earnings catalyst.

Oilfield services companies are also benefiting. Halliburton and SLB both reported that North American drilling activity has reaccelerated in March following a weather-related pause in January and February. Halliburton's CEO commented in a CNBC interview on Friday that the company's pricing power in pressure pumping services is the strongest it has been in more than a decade, supporting a significant beat to Q1 consensus estimates when the company reports in mid-April.

Looking ahead, energy investors are watching Monday's API crude inventory report, which consensus expects to show a sixth consecutive weekly drawdown, as well as the Baker Hughes rig count data due Friday. With the sector showing both fundamental and technical strength, institutional investors who have been underweight energy relative to the S&P 500 face growing pressure to add exposure before further upside escapes them.