Energy stocks were an afterthought for most of 2025 as investors focused on red-hot big tech stocks benefiting from AI spending. However, a quiet shift began last fall, and the group has steadily climbed to the top of Limelight Alpha’s proprietary sector ranking.
The oil stocks rally is largely driven by rising optimism about production growth rather than by hopes for soaring crude oil prices. The removal of Nicolas Maduro, which opened up Venezuela’s303 billion in proven reserves to development, is potentially the biggest production growth opportunity since fracking reshaped the Permian.
The optimism is palpable. The Energy Select SPDR ETF (XLE) and SPDR Oil & Gas ETF (XES) are up 23% and 51% since September, respectively.
And the latest data from Limelight Alpha currently scores the sector at 81.52, a stark contrast to technology’s score of 59.70.
Energy is highest-scoring S&P 500 sector
This analysis is powered by the Limelight Alpha sector rotation model, a multifactor framework I developed in 2003 to provide proprietary research to mutual and hedge fund managers. By blending fundamental and technical signals—including earnings growth, valuation, and price momentum—the model identifies secular shifts before they become mainstream.
The latest data confirms that energy is currently the top-scoring basket in the market. The model’s objective methodology filters out daily headline noise to focus on the core drivers that historically precede long-term outperformance.
Limelight Alpha
Energy’s strength suggests investors are warming up to the idea that portfolios have become too tilted toward technology. For perspective, technology currently accounts for roughly 35% of the S&P 500, while energy accounts for just 3% — a 20-year low. A decade ago, energy’s footprint was more than triple its current size.
The sector’s rise largely rests on oil stocks, particularly energy service companies likeSLB (SLB) (formerly Schlumberger), Baker Hughes (BKR), and Halliburton (HAL).
Those companies sit at the center of what could eventually total up to $100 billion in infrastructure spending to refurbish Venezuela’s oil fields.
During earnings calls, the CEOs of all three companies struck a positive tone about how quickly they could deploy assets in Venezuela if oil majors ramp up activity there.
SLB CEO Olivier Le Peuch said Venezuela was once a $1 billion business for his company, while Halliburton said it once generated half a billion in annual revenue there.
The potential for an acceleration in revenue, and a corresponding lift to earnings, is likely a major reason for the pivot higher, and a big catalyst for why energy equipment and services is among the strongest scoring industries in our industry ranking, alongside midstream (pipelines, storage terminals, and processing plants), and exploration & production stocks like Chevron (CVX), ExxonMobil (XOM), and ConocoPhillips (COP).
Venezuela’s risks make it a wildcard, but that may be a good thing
There are plenty of reasons to question whether the White House will succeed in its plans to tap Venezuela’s massive reserves.
So far, public comments from ExxonMobil and ConocoPhillips have poured cold water on their eagerness to go all-in on spending there.
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ExxonMobil’s CEO, Darren Woods, said in January that, under the current framework, Venezuela is “uninvestible.”
ConocoPhillips CEO Ryan Lance said they’re most focused on recouping the $10 billionthey’re owed there from past seizures stemming from Venezuela’s nationalization of its oil industry under the PSDVA banner during Hugo Chavez’s reign.
Chevron, which is the only one of those three companies to accept a minority stake in Venezuela operations when Chavez offered it, is more optimistic, given it’s already there and pumping black gold.
Chevron’s Venezuela projects:
- Petroboscán: A 39.2% interest in the Boscan Field.
- Petroindependiente, S.A.: 25.2% interest in the LL-652 Field at Lake Maracaibo
- Petropiar, S.A.: 30% interest in Huyapari Field within heavy-crude dominant Orinoco Belt.
- Petroindependencia, S.A.: 34% interest in Carabobo 3 Project in Carabobo area of the Orinoco Belt (extra-heavy crude).
- Ioran: 60% interest offshore in the Loran Field.
Source: Chevron.
Chevron’s C-suite suggested they could accelerate Venezuela production by 50% relatively quickly. Chevron was producing over 200,000 barrels per daythere before restrictions more than halved that amount in 2025. In 2026, it’s already recovered to 250,000 bpd, with more coming.
Oil majors’ mixed messages provide enough doubt to keep some investors at bay. But that’s not necessarily a bad thing, because, as we witnessed with artificial intelligence over the past few years, doubters keep money on the sidelines that can fuel future rallies on pullbacks to support levels, such as the 50-day moving average.
It’s when everyone agrees and is all-in on a trade’s direction that it’s most at risk of faltering.
How to play the energy stocks rally
The energy basket is underweight in most portfolios, creating a setup that mirrors the gold market’s breakout two years ago.
Related: Top energy stocks to buy amid Venezuela chaos
However, investors must remember that oil stocks are cyclicals prone to significant boom-and-bust cycles. They are sensitive to geopolitical shifts and OPEC+ production decisions, meaning they are rarely a “set-it-and-forget-it” trade.
Given these risks, a diversified approach is best. Conservative investors should focus on major ETFs like the Energy Select SPDR (XLE) for broad exposure. More aggressive investors might target energy service giants like Baker Hughes (BKR) or SLB (SLB), which are positioned to win infrastructure contracts if the Venezuela production reset gains steam.
Ultimately, the sector’s volatility should provide multiple opportunities to build positions near technical support levels. In this environment, “buying the dip” and smoothing out risk over time remains the most prudent strategy.
Todd Campbell owns shares in XES, SLB, HAL, CLB, and RIG.
Related: ConocoPhillips CEO sends strong message on Venezuela oil future
