There are a number of factors working for a sector-wide breakout:

📈Momentum

Energy components in the S&P 500 feature the highest median RSI at ~61.

🏃Catch-Up Trade

Unlike the broader S&P 500, the IEO and XLE have both yet to reclaim the April levels. The current backdrop suggests a catch-up bid is appropriate.

💸Under-Owned

Due to the lackluster price performance and fundamental headwinds, there aren’t a lot of energy bulls. While this unlikely to bring meaningful institutional longs back in, the under-ownership implies there are plenty incremental buyers available to move the needle.

🍰Easy [as cake] Risk Management

Depending on which opportunity you select, there are plenty of clear lines in the sand to the upside and downside.

The Commodity Market is Notoriously Hard to Handicap.

Currently, I see the market as event-driven, meaning headlines have a lot of sway. Word of de-escalation would unwind the price, whereas word of retaliation or regime change could provide the catalyst for a move higher. That said, I think these names can break out in a neutral tape with oil consolidating in the mid-to-upper 70s.