Energy was the best performing sector in 2021 and continues its impressive run. The sector is up 38% so far this year, while all other sectors are in the red.

The demand for oil continues to rise as global economies recover from the pandemic, and the war supercharged the rally since Russia was a major exporter of oil and natural gas.

Oil prices fell earlier this week due to a surge in the dollar and demand concerns resulting from continued Covid lockdowns in China, the world biggest oil importer.

Oil giants like  Exxon Mobil (XOM Quick QuoteXOM - Free Report) and Chevron (CVX Quick QuoteCVX - Free Report) recently reported a surge in profits for the first quarter but they are not spending on new projects. Instead, these companies are returning a lot of cash to shareholders in the form of dividends and share buybacks.

In general, investments in oil and natural gas have been declining as governments and investors prefer green energy but the transition to renewables would take many years.

Energy sector is one of just a few sectors enjoying positive estimate revisions, per Zacks Earnings Trends. Most investors have low exposure to energy since the sector still accounts for just about 4% of the S&P 500 index, down from about 11% a decade ago.

To learn more about the Energy Select Sector SPDR Fund (XLE Quick QuoteXLE - Free Report) , the SPDR S&P Oil & Gas Exploration & Production ETF (XOP Quick QuoteXOP - Free Report) and the Invesco S&P SmallCap Energy ETF (PSCE Quick QuotePSCE - Free Report) , please watch the short video above.

Exxon Mobil, Chevron (CVX Quick QuoteCVX - Free Report) , Occidental Petroleum (OXY Quick QuoteOXY - Free Report) and Southwestern Energy (SWN Quick QuoteSWN - Free Report) are among the top holdings in these ETFs.

Disclosure: I own XLE and XOP in the ETF Investor Portfolio.