Oil stocks surge, but rebound likely over for now

European energy firms have staged one of the biggest recoveries among industries this year.

Deutsche Asset Management’s Juan Barriobero, who bought the shares when they bottomed out, has stopped because they have become too expensive.

Oil and gas producers in the Stoxx Europe 600 Index have rebounded 19% since their lows in January as crude prices surged more than 50%.

That took their valuation to about 19 times estimated earnings, a 30% premium to the broader market.

“One of our biggest portfolio shifts this year was to go from underweight energy stocks to neutral at the start of the year,” said Mr Barriobero, a fund manager at Deutsche Bank investment arm in Madrid.

His firm oversees €10bn in European equities, and his DWS Crecimiento fund has climbed 4.6% in the past month.

With an estimate for oil to trade at an average $40 a barrel in 2016 — near the current price — Deutsche Asset Management does not see much more room for appreciation.

While energy stocks have been among the best performers in the equity rebound, analysts have kept slashing profit-growth projections and are now forecasting a 32% decline for this year.

Just three months ago, they predicted gains.