``Oil stocks should go back to the top,'' said Claes Ahrel, equity strategist at Laensfoersaekringar AB in Stockholm, which manages $20 billion. ``The current oil price is in nobody's earnings calculations.'' The Dow Jones Stoxx 600 Oil & Gas Index, whose two biggest members are BP Plc and Total SA, dove to the bottom of the pack among industry groups last quarter. The index slid 6.6 percent after surging 39 percent in the first nine months, the biggest gain among 18 groups in the Stoxx 600. Energy stocks in November became Europe's cheapest industry relative to estimated profits for the coming year, according to analyst estimates compiled by FactSet Research Systems Inc. in London. On that basis, they are trading at the lowest prices since at least 1999. The group's Stoxx 600 index rose last week for the first time in five weeks and had the second-best performance, behind technology shares. Prices climbed as crude-oil futures reached $64.45 a barrel, the highest since Oct. 12, in New York. BP, Europe's largest oil company, may shed light on the outlook for prices and earnings when it releases a quarterly business update on Jan. 11. Gains among oil stocks can underpin European markets. Energy companies are the second-biggest industry group in the Stoxx 600, accounting for 9.7 percent of the index's value. They trail banks, which make up more than a fifth of the measure. The Stoxx Oil & Gas Index climbed 3.6 percent last week, beating the Stoxx 600's 2.3 percent advance. The Stoxx 50 index added 2.6 percent for the week and the Euro Stoxx 50, a measure for the 12 countries sharing the euro, climbed 2.5 percent. European fund managers are becoming more optimistic about energy stocks, according to Merrill Lynch & Co.'s monthly survey of investors. Forty-six percent of respondents in December said they owned more shares in the industry than their weighting in indexes, up from 37 percent in the previous two months. Crude-oil prices may be contributing to the shift. Futures on the New York Mercantile Exchange ended last week at $64.21 a barrel, 16 percent higher than the fourth-quarter low of $55.40, set on Nov. 18. Oil jumped 40 percent last year even though prices retreated from a record of $70.85 a barrel reached on Aug. 30, the day after Hurricane Katrina struck platforms along the U.S. Gulf coast. The current price is more than twice the average of $30.97 a barrel from 2000 through 2004. Analysts raised their profit estimates for energy companies throughout 2005 to reflect the surge in oil and an even bigger rally in natural gas, which soared 94 percent in New York. Earnings jumped 45 percent last year on average, according to projections compiled by FactSet. One year ago, analysts were predicting a 3.5 percent decline for 2005. BP, based in London, posted a 34 percent increase in third- quarter profit in October. Paris-based Total, Europe's largest refiner, followed in November by reporting 32 percent growth. Both stocks rose more than 20 percent in 2005. Shares of Royal Dutch Shell Plc, the region's second- biggest oil producer, kept pace. Third-quarter earnings at the company, based in The Hague, jumped 68 percent to $9.03 billion. The quarterly profit was a record among European oil companies. Companies in the Stoxx Oil & Gas Index trade at an average of 10 times estimated profit, FactSet's data shows. The multiple is the smallest among the Stoxx 600's groups. In November, they were valued at 9.9 times earnings, the lowest for the group since FactSet's data starts in 1999. Analysts' projections for this year may again be too low, said Cesar Martinez, who helps manage $13 billion at Gesmadrid SA in Madrid. ``With prices near $60 a barrel, companies may beat estimates again, helping the shares,'' Martinez said. His firm owns shares of BP and Total. Earnings at the Stoxx 600's energy companies will increase by 1.9 percent on average this year, according to FactSet data. The forecast is below the 8.6 percent growth expected for the Stoxx 600 and the lowest among the 18 industries. Oil companies also stand to benefit from any further price increases. Crude may trade as high as $105 a barrel until 2009, helped by demand from China, according to a forecast by Arjun Murti, a Goldman, Sachs & Co. analyst. Murti said in a report last month that the forecast may be conservative. The belief that the world's oil supply is close to an irreversible decline is no longer ``on the fringes'' of the market, he wrote. Some investors aren't convinced oil stocks are a good bet because it is becoming harder and costlier to find new deposits and start production. Shell last month said spending on drilling and equipment will jump 27 percent to $19 billion in 2006 amid rising costs for rigs and steel. ``To get the same amount of oil, companies will have to invest more, and that will hurt their cash flow,'' said Dirk Thiels, who oversees the equivalent of $13 billion as head of equity funds at KBC Asset Management in Brussels. Thiels expects oil prices to settle into a range of $40 to $45 a barrel. He is ``neutral'' to ``slightly underweight'' on oil stocks, suggesting that his firm's holdings match or fall short of benchmarks. A British government proposal to increase taxes on energy producers may raise companies' costs even more. The U.K. wants to boost the charge on companies operating in the North Sea to 50 percent of pretax profit from 40 percent, Chancellor of the Exchequer Gordon Brown told Parliament on Dec. 5. Amid these concerns, Roger Nightingale, a global strategist for Millennium Global Investments in London, is optimistic that oil and gas shares have further to rise. ``Energy stocks are minting the money and will carry on doing so,'' said Nightingale, who helps manage $4.3 billion. ``I like them all.'' PIN/BLOOMBERG