Energy was the worst-performing S&P 500 sector in the back half of April after a 27 percent rally from late January to mid-April that had been driven by Middle East risk premium. Brent crude closed Friday at $108.17 a barrel, down 5.4 percent on the week, after Trump rejected Iran's initial counter-proposal but kept negotiations open at the Vienna technical talks scheduled for Sunday May 3. WTI closed at $99.85, off 4.97 percent on the week. Both contracts remain materially above the $74 a barrel implied breakeven for new US shale production according to the Dallas Fed's Q1 oil and gas survey. Producer earnings calls last week told two different stories depending on the asset base.
Integrated oil majors gave back roughly 8 to 11 percent in the second half of April after leading the S&P year to date. ExxonMobil closed Friday at $148.40, down 9.2 percent on the week, with the company reporting Q1 earnings of $2.84 per share against a $2.71 consensus on Friday morning, lifted by upstream production above guidance and a stronger refining margin print. Chevron at $186.20 closed down 7.8 percent. ConocoPhillips at $127.40 fell 11.4 percent. The integrated names had outperformed as Iran risk built into prices, and the rotation out has been mechanical rather than fundamental.
Refiners outperformed sharply on the same news. Valero closed Friday at $171.20, up 4.7 percent on the week, with Q1 earnings of $4.42 per share beating consensus by 31 cents. Marathon Petroleum at $241.30 was up 6.1 percent. PBF Energy at $52.40 was up 8.2 percent on a strong gasoline crack spread that Q1 earnings calls described as the best entering peak summer driving season since 2018. The refiners benefit from the spread between cheaper crude inputs and seasonal gasoline demand, which Memorial Day weekend traffic is now expected to validate.
The midstream subsector held up. Williams Companies at $54.20 was flat on the week. Energy Transfer at $19.40 was up 2.1 percent. Enterprise Products Partners at $34.60 was up 1.4 percent. Midstream is largely volume- and contract-fee-based, which insulates it from spot-price volatility but exposes it to long-term capex cycle risk. The MLP yield basket now offers an average distribution yield of 6.4 percent against a 10-year Treasury at 4.39 percent, which puts the spread back to roughly 200 basis points above the 10-year average.
For natural gas exposure, the picture is bifurcated. Henry Hub at $4.18 per MMBtu Friday was up 11 percent on the week on summer cooling demand forecasts and cargo flexibility tied to LNG export pricing. EQT at $48.40 was up 4.7 percent. Cheniere at $231.40 was up 6.1 percent on continued European LNG demand and a Q1 print that beat on volumes. The international gas spread has narrowed from the late 2024 peak but remains supportive for the US export complex, with TTF in Europe at roughly $11.20 per MMBtu and JKM at $13.40.
Oilfield services have been the disappointment. Schlumberger at $52.10 closed down 12.4 percent on the week and is down 17 percent year to date. Halliburton at $34.80 was down 11.4 percent on the week. The capex commentary on Q1 calls was cautious. North American land rig count is at 612 from a peak of 784 in 2023, and US Lower 48 producers continue to prioritize buybacks over volume growth. The international services book is performing better than the North American book, with Schlumberger's international revenue up 14 percent year over year against North American down 8 percent.
For the week ahead, three things are worth watching. The Vienna talks on Sunday May 3 will set the tone for crude on the Monday open, with consensus among major desks now pricing roughly a 40 percent probability of a framework agreement that lifts Iranian export caps by 800,000 barrels per day. The IEA monthly oil market report on Tuesday May 13 will revise demand forecasts for 2026, with current projections at 102.4 million barrels per day. And US Energy Information Administration weekly inventory data on Wednesday May 7 will show whether refiner runs are tracking above the seasonal norm into Memorial Day.
For long-term portfolio positioning, the integrated majors at current dividend yields of 4.2 to 4.6 percent and refiner free cash flow yields of 8 to 11 percent both look reasonable on a 12 to 18 month view if the broader macro holds. Energy as a sector now trades at 11.4 times forward earnings against the S&P at 22.8 times, which is the widest discount to the index since November 2020. The sector's weight in the S&P has fallen to 3.4 percent from a 6.8 percent peak in mid-2022, which makes it both contrarian and reasonably small as a position size for a diversified portfolio.