Market Watch: Oil Prices Stuck Below $70 While Energy Stocks Hit 52-Week Highs — What's Driving the Disconnect?

WTI crude oil has traded in a remarkably tight range throughout February 2026, fluctuating between $62.53 and $66.69 per barrel. The benchmark opened the month near $63.77 on February 6, dipped to a monthly low of $62.53 on February 17, and has since recovered to $66.36 as of February 23. Brent crude has followed a similar pattern, trading between $69.77 and $73.17, with the Brent-WTI spread holding steady around $5.50.

The subdued price action reflects competing forces. On the bearish side, rising global oil inventories and expectations of increased OPEC+ production are keeping a lid on prices. The EIA's projection of $53.42 average WTI for 2026 reflects expectations that supply growth — particularly from non-OPEC producers like the U.S., Brazil, and Guyana — will outpace demand growth. On the bullish side, geopolitical risk remains elevated, with recent U.S. and Israeli military strikes on Iran injecting a significant risk premium into energy markets.

While crude oil has been range-bound, natural gas has been far more volatile. Henry Hub natural gas prices plummeted from $4.37 per MMBtu on February 6 to $2.98 on February 18 — a 28% decline in less than two weeks — before stabilizing around $3.13 by February 23.

The collapse was driven by milder-than-expected weather forecasts across much of the United States, which reduced heating demand projections. Storage levels have also come in above seasonal norms, easing supply concerns that had pushed prices above $4 earlier in the month. For integrated energy companies like ExxonMobil that have significant natural gas and LNG exposure, the decline is a headwind — though not nearly enough to offset the strength in their equity valuations.

The most striking feature of the current energy landscape is the performance of major energy stocks relative to the underlying commodity. ExxonMobil is trading at $152.60 — up 56% from its 52-week low of $97.80 — with a market capitalization of $644 billion. Chevron hit $186.75, just $1.15 below its 52-week high, and its $373 billion market cap reflects a 41% rally from its low of $132.04. ConocoPhillips at $113.46 actually touched a 52-week high of $113.80 intraday, representing a 42% surge from its low of $79.88.

The disconnect between commodity prices and equity performance tells a story of structural transformation. The energy majors have spent the past several years dramatically improving capital discipline, cutting costs, and returning unprecedented amounts of cash to shareholders through buybacks and dividends. ExxonMobil's trailing earnings per share of $6.70 and PE of 22.78 would have been considered rich for an oil company five years ago, but investors are now paying up for the predictability of these cash flow streams.

Chevron's higher PE of 28.13 reflects market confidence in its capital return program and a cleaner balance sheet following the Pioneer and Hess acquisition sagas. ConocoPhillips, with the most attractive valuation at 17.87 times earnings, benefits from its pure-play upstream focus and lower breakeven costs.

One underappreciated driver of energy stock outperformance is the Federal Reserve's ongoing rate-cutting cycle. The federal funds rate has fallen from 4.33% in August 2025 to 3.64% in January 2026 — a 69 basis point reduction over five months — and markets expect further cuts through the year.

Lower interest rates benefit energy companies in multiple ways. They reduce the cost of capital for large infrastructure projects, make high-dividend energy stocks more attractive relative to bonds, and support the broader economic activity that drives fuel demand. With the 10-year Treasury yield declining in tandem with short rates, the energy sector's dividend yields — typically ranging from 3% to 4% for the majors — become increasingly compelling for income-seeking investors.

Inflation data adds another dimension. The Consumer Price Index rose to 326.59 in January 2026 from 323.29 in August 2025, showing persistent but moderate inflationary pressure. Energy companies, whose revenues are priced in current dollars while many costs are fixed, tend to perform well in mildly inflationary environments — a dynamic that may be contributing to the sector's premium valuation.

The elephant in the room for oil markets is geopolitical risk. Recent joint U.S. and Israeli military strikes on Iran have dramatically escalated tensions in a region that accounts for roughly one-third of global oil supply. While oil prices have not spiked as dramatically as they might have in previous decades — reflecting the U.S.'s position as a major producer and higher global spare capacity — the risk of supply disruption through the Strait of Hormuz remains a tail risk that the market cannot ignore.

For energy investors, the geopolitical backdrop creates an asymmetric risk profile. If tensions de-escalate, oil prices may drift lower toward the EIA's $53 forecast, putting pressure on upstream earnings — but likely cushioned by cost discipline and hedging programs. If tensions escalate further, crude could spike toward $80 or above, delivering windfall profits to the majors.

This asymmetry may partly explain why energy stocks are trading at premium valuations despite subdued crude prices. Investors are effectively paying for an embedded option on a potential supply shock, while collecting dividend yields that exceed Treasury rates in the meantime. ExxonMobil has demonstrated 43 consecutive years of annual dividend growth — a track record that provides comfort even if commodity prices weaken.