Energy exchange traded fund traders will be watching so-called Big Oil as industry leaders reveal fourth quarter results.
The energy sector has been the worst performing area of the market, plunging along with oil prices. Over the past year, the Energy Select Sector SPDR (NYSEArca: XLE) declined 27.2%, Vanguard Energy ETF (NYSEArca: VDE) dropped 28.9%, iShares U.S. Energy ETF (NYSEArca: IYE) fell 27.9% and Fidelity MSCI Energy Index ETF (NYSEArca: FENY) decreased 27.9%.
The sector will be put the test once again as Chevron (NYSE: CVX) and ExxonMobil (NYSE: XOM) help provide clarity into how the energy industry was holding up while crude oil pushed toward record lows.
Chevron will report earnings before market open Friday, January 29. ExxonMobil will reveal fourth quarter results before market open Tuesday, February 2.
The two companies make up a significant chunk of broad market capitalization-weighted energy sector ETFs. For instance, XLE holds 19.5% XOM and 14.7% CVX. IYE has 27.0% XOM and 13.5% CVX. VDE includes 24.4% XOM and 13.0% CVX. FENY has 26.4% XOM and 13.2% CVX.
These large integrated oil companies are expected to hold up better than drilling stocks as these giants have both upstream exploration and production, along with downstream refining operations.
The refining segment of the energy sector has benefited from lower costs as crude oil declined, which have helped cushion the industry, reports Tom DiChristopher for CNBC.
Moreover, oil majors have tightened their belts, reducing costs by laying off thousands of workers and halted many new projects.
Investors will also be keeping a close eye on dividends, especially with oil prices at $30 per barrel. Oil CEOs have pledged to maintain their dividends, but with oil prices dipping to 13-year lows, traders are growing skittish.
Both Chevron and Exxon have maintained dividend growth for decades, and any dividend cuts may dissuade long-term investors. The SPDR S&P Dividend ETF (NYSEArca: SDY), which holds firms that have a minimum dividend increase streak of 20 years for inclusion, also includes 2.1% CVX and 1.5% XOM weights.
Max Chen contributed to this article.