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The first graph below is that of the monthly cycle of oil. Note that it falls through 2025. When this graph was first generated in the autumn of 2024, I thought that it projected the effect of the new administration’s efforts to increase energy production. Thus far, this appears to be the case.
Chart 1: Monthly Oil Cycle
The monthly cycle falls through 2025.
The price action of the last few months has been instructive in confirming the bearish view. The next chart is a histogram of the monthly expected return of oil. The seasonal strong period has not lifted the price. Oil quotes have fallen despite the fact that price is in its strongest seasonal period. From March 21 to May 21, price has risen 75.6% of the time over the last 42 years. From March 21, 2025 to the present, price has declined by 8.9% as opposed to the seasonal tendency a 4.2% gain.
Chart 2: Oil Monthly Histogram*
The seasonally strong period has not manifested.
*Expected Return
This study is now applied to the energy stocks. The first graph below is the monthly cycle of the XLE energy stock ETF. Below that is the seasonal monthly performance of the XLE. Here, we see a cycle conflict. The monthly cycle bottoms now but the seasonal cycle peaks now. April has been the strongest month, up 59% of the time for a 3.4% gain. The XLE has risen only 30%-38% of the time after the spring peak. From March 23 to the present, oil has fallen by 12.2% as opposed to its normal seasonality of rising in that time period by 5.6%. Again, the seasonality has been overridden in its most bullish seasonal stretch.
The resolution of the clash will likely be an oversold rally by the strongest energy stocks.
Chart 3: Energy Sector Monthly Cycle
This energy sector cycle is at a low.
Chart 4: Energy Sector Monthly Price
Seasonality is a a peak.
Below, we see the relative strength of the stocks in the sector. If one needs to add energy weightings in portfolios, concentrate on the stocks at the top of this list. Thirteen stocks are stronger than the XLE benchmark. Exxon is the only well-known large-cap stock in the relatively strong thirteen. The potential gains are in the lesser-known names.
Chart 5: Energy Sector Relative Strength
This is the current relative strength of the energy sector stocks.
Comstock Resources (CRK) and Cheniere Energy (LNG) are the strongest stocks in the group. The graphs below suggest continued outperformance.
Chart 6: Comstock Daily Price, Momentum And Relative Strength
Relative strength is likely to persist.
Chart 7: Cheniere Daily Price, Momentum And Relative Strength
This has been the second strongest stock in the sector.
