At first sight, the following chart is pretty jaw dropping:

WTI Crude Oil (spot) vs. XLE


Thus far in the month of December WTI crude oil is down more than 22% while the XLE (SPDR Energy ETF) is up 1%!

This tremendous outperformance by the large integrated energy companies that comprise the XLE (Chevron, Exxon Mobil, etc.) is actually explainable. First of all, most large oil producers have sizable hedge books with price floors (many of these floors are currently around $70/barrel) which hedge much of their production 12-18 months out. Therefore, crude oil's decline during December (from around $70/barrel at the beginning of the month to below $54/barrel today) does not have a huge near-term impact upon large integrated oil producers' earnings.

Second, many analysts are forecasting a decent rebound in oil prices during 2015:


Even though the futures curve isn't nearly as optimistic as Goldman Sachs or the analysts surveyed by Bloomberg, equity investors are siding with the analysts and also betting that cost containment efforts will help to buoy oil firms' earnings in the new year.