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.
