Continuing the trend since the start of this year. the month of May turned out tumultuous for Wall Street, bringing wild market action and volatility. A plethora of issues, including historically high inflation, stuttering economic growth, worries about a recession and a higher interest rate regime, tighter monetary policies adopted by major central banks, and prolonged supply-chain disruptions significantly hurt market participants’ confidence. However, a strong domestic demand picture and the labor market’s return to the pre-pandemic level helped the equities recover somewhat. At the end, May was evenly poised for investors, with the S&P 500 — regarded as one of the finest reflections of the stock market as a whole — little changed, losing 0.6% for the month.

The Biggest Winner is Energy

Although the S&P 500 finished the month essentially flat, a particular group of stocks stood out.

On the sectoral front, it was Oil/Energy that topped the S&P standings for the month with a gain of 16%, while most others finished up marginally or lost value. The space has comprehensively outperformed the market, with the Energy Select Sector SPDR’s (an assortment of the largest U.S. energy companies, popularly known by its ticker, XLE) impressive gains fueled by a constructive demand picture despite the geopolitical premium. To be precise, the energy index has continued to move higher this year after comfortably topping the S&P 500 leaderboard in 2021. It has generated a total return of more than 57% in 2022 compared with the S&P 500’s loss of 13.3%.

The energy market continues to enjoy support from geopolitical uncertainty amid Russia’s military operations in Ukraine. In March, crude prices surged to multi-year highs of $130 on concerns about supplies from Russia, which is one of the world's largest producers of the commodity. The Biden administration’s ban on the import of Russian crude and energy products contributed to oil’s rapid price increase. Agreed, crude has pulled back from those lofty levels but with the conflict showing no signs of a quick resolution and the European Union finally following the United States in blocking imports of Russian energy — even at the detriment of their economies — is giving fresh impetus to the oil bulls.

While there are jitters over soaring inflation and stuttering economic growth, these have been more than offset by the prospect of robust motor fuels’ consumption in the summer driving season that could see a release of built-up demand.

Even the fundamentals point to a tightening of the market. Per the latest government report, U.S. commercial stockpiles have been down more than 13% in a year, prompted by a demand spike owing to the reopening of economies and a rebound in activity.

Meanwhile, natural gas moved past $9 per million British thermal units (MMBtu). First, a late-season cold and then a quick turnaround to summer heat drove the fuel’s demand load. Natural gas also remained supported by a stable demand catalyst in the form of continued strong liquefied natural gas (LNG) feedgas deliveries. LNG shipments for export from the United States have been robust for months on the back of environmental reasons and record-high prices of the super-chilled fuel elsewhere. Now, with the Russia-Ukraine conflict, LNG has become even more coveted, with an increasing number of countries vying for the American-made fuel to replace supplies from Moscow. This means LNG deliveries are poised to rise further.

While most energy investors have had something to cheer about in May, some stocks certainly performed better than the others. The five largest contributors to the monthly gains were Devon Energy (DVN Quick QuoteDVN - Free Report) , Marathon Oil (MRO Quick QuoteMRO - Free Report) , Occidental Petroleum (OXY Quick QuoteOXY - Free Report) , Diamondback Energy (FANG Quick QuoteFANG - Free Report) and Pioneer Natural Resources (PXD Quick QuotePXD - Free Report) .

Will these winners maintain their run in June too, or will they eventually run out of steam? Here's a summary of them:

Devon Energy: Devon is an independent energy company whose oil and gas operations are mainly concentrated in the onshore areas of North America, primarily in the United States. The company’s assets are spread across the key oil assets of Delaware Basin, Eagle Ford, Anadarko Basin and Powder River Basin.

In the last reported quarter, Devon Energy reported adjusted earnings of $1.88, beating the Zacks Consensus Estimate of $1.74 per share by 8.1%. The outperformance reflects the company’s oil-weighted production mix and low operating costs as well as recovery in commodity prices.

This stock outperformed the other energy companies and was up 28.8% during the period, ranking second on the S&P 500 list. DVN’s merger with WPX Energy has strengthened its operations in the prolific Permian Basin. The Zacks Rank #2 (Buy) upstream operator’s cost management, divestiture of Canadian assets, and completion of the Barnett Shale gas assets sale will allow it to focus on its holdings in four high-quality, oil-rich U.S. basins. The company’s innovative dividend policy should also attract investors and position it for more upside in the near-to-medium term.

Marathon Oil: The upstream energy company’s oil and gas operations are mainly concentrated in the United States (including Oklahoma, Eagle Ford, Bakken and Northern Delaware) and Equatorial Guinea.

In the last reported quarter, Marathon reported adjusted earnings of $1.02, beating the Zacks Consensus Estimate by 4.1%. MRO’s bottom line was favorably impacted by stronger liquid realizations and solid domestic production.

Marathon, carrying a Zacks Rank #1 (Strong Buy), rallied 26.1% in May and is poised for further capital appreciation. In particular, MRO’s robust operational metrics suggest strong long-term cash flows that should support higher price points for its shares. The wells drilled by Marathon have extremely low oil price breakeven costs and need oil prices of just $35 a barrel to be profitable. It’s also important to remember that the company’s significant debt maturities will mostly fall after 2025 and as such, there does not appear to be much risk here.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Occidental Petroleum: Founded in 1920, Houston, TX-based Occidental Petroleum is an integrated oil and gas company, with significant exploration and production exposure. OXY is also a producer of a variety of basic chemicals, petrochemicals, polymers and specialty chemicals.

In the last reported quarter, OXY came up with earnings per share of $2.12, above the Zacks Consensus Estimate of $1.97. The company’s bottom line was buoyed by strong operating efficiencies and higher commodity prices.

This stock was the third-best sector performer on the S&P 500 Index, with shares appreciating 25.8% in the past month. It appears that Occidental will have more room to run up. It continues to increase production from high-quality asset holdings and lower outstanding debts through proceeds from non-core assets sale. The acquisition of Anadarko, investment to strengthen infrastructure and its Permian Basin exposure also continues to boost the performance of the Zacks Rank #1 company.

Diamondback Energy: Diamondback Energy focuses on growth through a combination of acquisitions and active drilling in the Permian Basin. Diamondback's leading position in the unconventional play got another leg up with last year’s takeover of QEP Resources.

Diamondback’s first-quarter bottom line came in above expectations, led by better-than-expected production and a surge in energy prices. FANG reported adjusted earnings of $5.20 per share, which surpassed the Zacks Consensus Estimate of $4.74.

This Zacks Rank #2 stock ended 22.7% higher in the last month. Diamondback appears well-positioned with its leading position in the Permian Basin, which was further strengthened by the acquisition of QEP Resources. The transaction has boosted FANG’s production and proved reserves in the region, and has offered synergy benefits. Diamondback also boasts a low-cost structure and investment-grade balance sheet, which should allow it to thrive in the ongoing commodity upcycle.

Pioneer Natural Resources: It is an explorer and producer of oil, natural gas and natural gas liquid. The leading upstream energy firm primarily has operations in the Permian, the most prolific basin in the United States.

PXD’s first-quarter bottom line came in above expectations, reflecting higher oil-equivalent production volumes and commodity price realizations. Pioneer Natural reported earnings of $7.74 per share, which handily surpassed the Zacks Consensus Estimate of $7.32.

This Zacks Rank #2 stock ended 22.5% higher in May. PXD appears well-positioned to benefit from the supportive industry fundamentals. One of the biggest producers in the Permian Basin, the company has a total holding in the basin of more than 1 million net acres, which supports long-term oil production growth. With its debt to capitalization being persistently lower than the industry over the past few years, Pioneer Natural is in good financial health.