Long-beleaguered crude oil made an unexpected comeback this week with prices going north for the second consecutive day on Tuesday. The two global benchmarks, the Brent crude futures and the U.S. crude's West Texas Intermediate (WTI) futures rose 1% and 3%, respectively. The upside is significant since only last week the commodity dropped to levels not seen since Feb 2009.

Our bullishness is confirmed by the fact that WTI crude zoomed from around $34 per barrel to above $37 barrel in the last couple of trading sessions. And if we adhere to the adage that it’s better late than never, we see brighter days this week for investors in this space.

As a result on Tuesday, the Energy Select Sector SPDR (XLE - ETF report) gained 2.5%. Dow components Exxon Mobil Corp. (XOM - Analyst Report) and Chevron Corp. (CVX - Analyst Report) advanced 4.5% and 3.8%, respectively. Other key stocks from the energy sector such as Occidental Petroleum Corp. (OXY - Analyst Report), ConocoPhillips (COP - Analyst Report) and Schlumberger Ltd. (SLB - Analyst Report) moved up a respective 2.7%, 2.1% and 1.0%.

The surprise was complete for the broader market which almost discounted the commodity after the latest buzz about the lifting of the four-decade-old ban on U.S. oil exports. The market’s primary concern was that the commodity’s steep decline reflected a bigger-than-expected drop in demand as a result of decelerating global economic growth. Questions about China’s economic outlook and weakness in Brazil, Russia and many other emerging markets stem from these growth worries.

Proxy Revival?

The question that now comes first to the minds of investors ravaged by the multi-year-long crude price free-fall is the sustainability of this revival. U.S. crude futures witnessed a fall from the skies from Jun 2014 ($107 per barrel) to the deep pit of around $35 per barrel recently. The cascade was due to bearish comments from International Energy Agency (IEA) that sees the global oil glut as aggravating next year in the face of slowing demand growth.

Oil was also undone by The Organization of the Petroleum Exporting Countries (OPEC). Notably, OPEC’s latest monthly report showed that the oil cartel’s November production rose to a 3-year high.

Crude oil prices, which are now moving north, may again be troubled by a potential Federal rate hike. The Fed is widely expected to hike benchmark interest rates for the first time in almost a decade at its ongoing policy meeting. Renewed rate hike jitters came right after strong domestic U.S. gross domestic product (GDP) recovery in the third quarter. Per the U.S. Department of Commerce, GDP expanded at 2.1% in the quarter versus the expected 1.5%.

Lastly, credit ratings agency Moody’s Corp. (MCO - Analyst Report) slashed its 2016 Brent crude oil estimate from $53 per barrel to $43. The bearish revision comes in the wake of the outlook for prolonged oversupply as additional production from Iran would offset any slowdown in U.S. output.

Now What?

The current change in demand-supply dynamics put energy players on radar of investors scouring for a lift in the fortunes of the space. So long, the sector was ravaged by falling realizations from upstream operations and a high level of inventory which showed no decline despite a marginally lower domestic oil rig count as reported by Baker Hughes Inc. (BHI - Analyst Report). Now, investors can only hope that the rise in the crude price level does not end up being a short-term phenomenon.

5 Energy Growth Picks

Smart investors should ride on this surge before the wave comes crashing down again. For that, we have identified four energy stocks based on their favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or #2 (Buy) – and Growth Style Score ‘A’ or ‘B’ using our new style score system and their current valuation.

A stock with such a combination has incredible potential for the near term. So stick to the script and buy these stocks to maximize your gains.

Diamond Offshore Drilling, Inc. (DO - Analyst Report)

Diamond Offshore is a leading offshore driller providing contract drilling services to the energy industry around the globe with a total fleet of 33 offshore drilling rigs, including one rig under construction. Diamond Offshore's fleet consists of 23 semisubmersibles, one of which is under construction, four dynamically positioned drillships and six jack-ups.

Investors can count on the stock because it has a Growth Score of “B” and a Zacks Rank #2. Positive earnings estimate revisions are encouraging. The stock climbed 4.7% in the last trading session to close at $21.88. The closing price was over 45% off its 52-week high price of $40.00. The company has delivered positive earnings surprises in the last four quarters, with an average surprise of 32.80%.

Alon USA Partners, LP (ALDW - Snapshot Report)

Alon USA Partners owns and operates a crude oil refinery in Big Spring, TX with a crude oil throughput capacity of 73,000 barrels per day. Alon Partners refines crude oil into finished products, which are marketed primarily in West Texas, Central Texas, Oklahoma, New Mexico and Arizona through its wholesale distribution network to both Alon Energy's retail convenience stores and other third-party distributors.

It offers a great investment potential and can be an impressive choice for growth investors, given its Growth Score of “B” and Zacks Rank #1. The stock added over 2.8% in the last trading session to close at $21.96. The company has delivered positive earnings surprises in the last four quarters, with an average surprise of 36.87%.

HollyFrontier Corp. (HFC - Snapshot Report)

HollyFrontier Corporation is an independent petroleum refiner and marketer that produces high-value light products such as gasoline, diesel fuel, jet fuel and other specialty products. The company markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states.

It is a solid bet with a Growth Score of “A” and a Zacks Rank #2. The company has delivered positive earnings surprises in the last three out of four quarters with an average surprise of 2.22%. The stock surged more than 9% year to date to close at $41.07. Despite this, the closing price is more than 24% lower than its 52-week high of $54.73.

Contango Oil & Gas Company MCF

Houston-based Contango Oil & Gas Company is a independent energy company engaged in the acquisition, exploration, development, exploitation and production of crude oil and natural gas properties offshore in the shallow waters of the Gulf of Mexico and in the onshore Texas Gulf Coast and Rocky Mountain regions of the United States.

It is yet another stock to invest in given its Growth Score of “A” and a Zacks Rank #1. The stock jumped 8.1% in the last trading session to close at $6.79. However, its closing price is much lower than its 52-week high of $33.74. The company delivered positive earnings surprise of 462.50% in the last quarter.

ReneSola Ltd. (SOL - Analyst Report)

ReneSola is a leading brand and technology provider of energy efficient products. Leveraging its global presence and expansive distribution and sales network, ReneSola is well positioned to provide its highest quality green energy products and on-time services for installers, and green energy projects around the world.  

It is a solid bet with a Growth Score of “B” and a Zacks Rank #1. The stock gained almost 4% in the past month to close at $1.31. Despite this, the closing price is more than 33.5% lower than its 52- week high price of $1.97. The company delivered positive earnings surprises in three of the last four quarters, with an average surprise of 77.06%.

Bottom Line

Looking at the strong growth fundamentals of these companies, we expect them to beat all odds to emerge as winners. So take advantage of these stocks, which have already proven their mettle in a sticky situation. These picks have rocketed to fame with grand performances and hold even greater promise for the coming days.