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The energy sector is the top performer this year, buoyed by higher oil prices. U.S. oil and Brent futures logged in the strongest January in decades, soaring about 17%. A supply shortage and political tensions in Eastern Europe and the Middle East coupled with unprecedented demand has been acting as the major tailwinds for oil price.

The solid trend is likely to continue with the two big oil giants — Exxon Mobil (XOM - Free Report) and Chevron (CVX - Free Report) — posting better-than-expected earnings results. This is especially true as Exxon Mobil posted its biggest quarterly profit in seven years while Chevron had its most profitable year since 2014.

Following the results, energy ETFs like Energy Select Sector SPDR (XLE - Free Report), iShares U.S. Energy ETF (IYE - Free Report) ), Vanguard Energy ETF (VDE - Free Report), and Fidelity MSCI Energy Index ETF (FENY - Free Report) with the largest allocation to the energy behemoths are in focus.

Earnings in Focus

Exxon Mobil came up with earnings of $2.05 per share, beating the Zacks Consensus Estimate of $1.96 and improving from the year-ago earnings of 3 cents. Revenues jumped 83% to $85 billion and edged past the estimate of $82.4 billion. This marks its strongest profit in seven years. The shares of the largest U.S. oil producer jumped more than 6% to the highest level since April 2019, following the robust results.

Chevron reported earnings of $2.56 per share, missing the Zacks Consensus Estimate of $3.11 but improving from a loss of a penny per share in the year-ago period. Revenues jumped 91% year over year to $48.13 billion and edged past the consensus mark of $45 billion. Chevron lost more than $5 billion in market value following the earnings miss. However, the company posted $15.6 billion in profit, marking its best year since 2014 and an enormous improvement from the $5.5 billion loss it had incurred in 2020.

ETFs in Focus

Energy Select Sector SPDR (XLE)

Energy Select Sector SPDR is the largest and the most popular ETF in the energy space, with AUM of $32.9 billion and an average daily volume of 33 million shares per day. It offers exposure to the broad energy space and follows the Energy Select Sector Index. Energy Select Sector SPDR holds 21 securities in its basket, with Exxon Mobil and Chevron occupying the top two spots with 23.8% and 20.1% share, respectively.

Energy Select Sector SPDR charges 10 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.

Vanguard Energy ETF (VDE)

Vanguard Energy ETF provides exposure to a basket of 103 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. Here again, Exxon and Chevron are the two leading firms with, respectively, 20.2% and 17.7% allocation.

Vanguard Energy ETF has amassed $7 billion in its asset base and sees a good volume of about 1.8 million shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a High risk outlook.

iShares U.S. Energy ETF (IYE)

iShares U.S. Energy ETF tracks the Dow Jones U.S. Oil & Gas Index, giving investors exposure to U.S. companies that produce and distribute oil and gas. It holds 37 stocks in its basket with Exxon Mobil and Chevron taking the top two positions in the basket at 21.5% and 17% share, respectively.

iShares U.S. Energy ETF charges 41 bps in fees per year from its investors. It has AUM of $2.9 billion and an average daily volume of about 3.2 million shares. The product has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

Fidelity MSCI Energy Index ETF (FENY)

Fidelity MSCI Energy Index ETF fund follows the MSCI USA IMI Energy Index, holding 107 stocks in its basket. Of these, XOM and CVX take the top two spots at 21.5% and 17.6%, respectively.

Fidelity MSCI Energy Index ETF charges 8 bps in annual fees and trades in a good volume of around 1.2 million shares. It has accumulated $1.2 billion in its asset base and has a Zacks ETF Rank #3 with a High risk outlook.