With investors knowing that the fourth quarter was trying one for oil companies because of crude’s slide, the earnings issue will be more about what XLE’s constituents say about first-quarter profits. With the United States Oil Fund (NYSEArca: USO) down 16.5% year-to-date and having touched new multi-year lows last Friday, the outlook is murky. [Value in Oversold Oil ETFs]

“Those valuations are unlikely to come down as few think the price of oil has bottomed. That means energy companies are likely to see their earnings continue to shrink,” according to the Journal.

There is some hope for Exxon Mobil (NYSE: XOM) and Chevron, XLE’s two largest holdings and a combined 30.7% of the ETF’s weight.

Exxon and Chevron are also two of the largest oil refiners and refiners benefit when oil prices slide because lower oil prices reduce input costs for refiners, which can lead to higher margins. Exploration and production stocks are usually more sensitive to oil price fluctuations than their integrated counterparts, like Exxon and Chevron. [Waiting on an Energy Sector Rebound]

Energy Select Sector SPDR

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