As has been widely documented, the energy sector is rebounding in dramatic fashion. However, some exchange traded funds are more levered to that theme than others. Risk-tolerant investors may want to consider exploration and production ETFs as a way of gaining exposure to more upside in oil prices.

That includes the iShares U.S. Oil & Gas Exploration & Production ETF (Cboe: IEO). IEO follows a traditional market capitalization-weighted indexing methodology, which exposes investors to larger companies like ConcoPhillips, EOG Resources and Phillips.

The $432.31 IEO holds 63 stocks and tracks the Dow Jones U.S. Select Oil Exploration & Production Index.

Current OPEC compliance with production cut plans remains above their historical average, and it usually takes between two to three quarters for inventories to normalize after the cuts. The challenge for energy equities is that some oil market observers see more declines coming for crude. Oil traders are concerned over how fast U.S. shale oil producers will increase production to capture the rising prices.

The Case For Energy Equities

There are geopolitical catalysts looming that spark higher oil prices, which have the potential to beneift ETFs such as IEO.

“We see today’s backdrop of heightened Gulf tensions, supply constraints and steady global economic growth persisting,” said BlackRock in a recent note. “Geopolitical tensions in the Middle East could flare further in the near term, particularly between the U.S. and Iran. Oil supply could also tighten if OPEC extends production cuts in June, or Venezuelan production falls further. Yet the rise in oil prices we have seen so far is unlikely to pose a significant drag on the global economy and its impact on core inflation should be minimal, we believe.”