Oil price hit the highest level in three years on fears of a U.S. strike on Syria. With this, oil price jumped nearly 8% so far this week with U.S. crude rising above $67 per barrel while Brent oil climbed to $72 per barrel.

Syria Threatens Oil Supply

Although Syria is not a key oil producer, the threat of military action in the region triggered concerns about crude flows across the wider Middle East, which is one of the major oil producers and accounts for one-third of the total world’s oil. As such, the malaise may disrupt oil supplies in the region, leading to a further rise in the oil prices.

Additionally, concerns that the United States could renew sanctions against Iran is also driving the oil price higher.

Market Impact

The growing concern on Syria outweighs the negative inventory and production data report from Energy Information Administration (EIA) for last week. According to the report, the U.S. crude stockpiles rose 3.3 million barrels to 428.6 million barrels last week (ending April 6) against the analysts’ expectation of a decline of 189,000 barrels.Meanwhile, crude oil production topped 10.53 million barrels per day last week for the last time. The United States now produces more crude than top exporter Saudi Arabia.

The impressive jump in oil prices also had a big impact on energy stocks and ETFs this week, helping these to gains as well. In fact, the surge has pulled the energy stocks out of the doldrums. This is especially true as the S&P 500 energy Index and the Energy Select Sector SPDR ETF (XLE - Free Report) are now out of the correction territory, where they have languished for two months.

As a result, we have highlighted a few ETFs and stocks that could make a great play for an oil rebound:

ETFs to Tap

While there are several ETFs to play the rally in oil prices, we have highlighted three funds each from different zones that are the biggest beneficiaries from this trend.

Oil Futures ETFs - United States Oil Fund (USO - Free Report) : This is the most popular and liquid ETF in the oil space with AUM of $2 billion and average daily volume of around 18 million shares. The fund seeks to match the performance of the spot price of West Texas Intermediate (WTI or U.S. crude). The ETF has 0.72% in expense ratio and gained 4.9% in a week.

Energy ETFs – SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) : This fund provides equal weight exposure to 69 firms by tracking the S&P Oil & Gas Exploration & Production Select Industry Index. Each holding makes up for less than 2.13% of the total assets. XOP is one of the largest and popular funds in the energy space with AUM of over $2.4 billion and expense ratio of 0.35%. It trades in heavy volume of around 15.8 million shares a day on average and has risen 6.3% in a week. The product has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

Leveraged Energy ETFs – Direxion Daily Energy Bull & 3x Shares (ERX - Free Report) : This fund creates a triple (3x or 300%) leveraged long position in the Energy Select Sector Index while charging 95 bps in fees a year. It is a popular and liquid option in the energy leveraged space with AUM of $472.3 million and average trading volume of around 2.1 million shares. ERX has surged 14.3% in the same time frame.

Stocks to Tap

We have chosen three stocks using the Zacks Stock Screener that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) with a VGM Style Score of A or B. The combination of these two offers the best upside potential. Additionally, these stocks returned handsomely in a week’s time.

Murphy Oil Corporation (MUR - Free Report) : This company is an independent exploration and production company with a strong, oil-weighted portfolio of global offshore and onshore assets with upside to our exploration program. The stock saw positive earnings estimate revision of three cents over the past 30 days for this year and has an expected earnings growth rate of 776.92%. It has a Zacks Rank #2 and a VGM Score of B. Murphy Oil surged 10.1% in a week.

CNOOC Limited (CEO - Free Report) : This Zacks Rank #1 company is engaged primarily in the exploration, development and production of crude oil and natural gas offshore China. The stock saw positive earnings estimate revision of 34 cents for this year over the past 30 days and has an expected growth rate of 80.75%. The stock has a VGM Score of A and was up 9.4% in the same time frame. 

Continental Resources Inc. (CLR - Free Report) : This is a crude-oil concentrated, independent oil and natural gas exploration and production company with operations in the Rocky Mountain, Mid-Continent and Gulf Coast regions of the United States. It has seen positive earnings estimate revision of five cents for this year over the past 30 days and has an estimated earnings growth of 370.59%. The stock has a Zacks Rank #1 and a VGM Score of B. It has gained 5.1% in a week