Oil Weekly #91: The quarter is over! Considering windfalls and inertia

Research evidence excerpt

Oil Weekly #91: The quarter is over! Considering windfalls and inertia

June 28, 2026

Investment Conclusion

Energy outperformed the broader market this past week, down just 0.1% versus the S&P 500 down 1.9%, despite

Brent falling nearly 10% as crude prices retraced toward pre-war levels and Strait of Hormuz flows resumed. Within

our coverage, refiners led the way, up 6.2%, while the majors were down 2.0% w/w. Henry Hub saw some relief,

rising 3.5% on the week. Refining cracks were up 16% w/w, supported by the widening spread between lower crude

prices and lagged product pricing.

We continue to monitor developments in Iran closely. The combination of uncertainties keeps us unwilling to make

knee-jerk changes in sector positioning. For now, we continue to view the biggest beneficiaries of transitory windfalls

across oil, gas and refining as deleveraging events.

We still see no reason to change our characterization of sector risk as ‘fade not follow’. At the individual stock

level, quantifying risk is imprecise at best, but screened through 1yr & full curve FcF sensitivity, we see relative oil

risk differentiated by beta. This turns our attention to the next leg of sector strategy: whether to add exposure on

presumed commodity weakness, and if so, targeting what stocks.

Rate of change, deleveraging and absolute value remain our favored screens to revisit the broader energy sector

- if and when the macro-outlook normalizes. BP, OXY, APA, COP, DVN, TTE and PSX are our preferred routes for

incremental sector exposure as this plays out. It is with this backdrop that we expect sector dynamics through the 60

day negotiating period to mirror the last two months: rangebound, exposed to profit-taking, and at risk of rotation.