Over the past three months, nearly all of the worst performing exchange traded funds have direct ties to oil. Wade through the commodities plays such as the iPath S&P GSCI Crude Oil Index ETN (NYSEArca: OIL) and the United States Oil Fund (NYSEArca: USO) and the trail of tears includes scores of country ETFs and sector funds.

Oil services ETFs are predictable members of that less-than-illustrious list. The Market Vectors Oil Service ETF (NYSEArca: OIH), iShares U.S. Oil Equipment & Services ETF (NYSEArca: IEZ), SPDR Oil & Gas Equipment & Services ETF (NYSEArca: XES) entered Tuesday with an average 90-day loss of 27.6%, firmly positioning oil services stocks and ETFs as a hated asset class. [Big Oil Projects at Risk]

Bludgeoned and disdained sectors also make for ideal contrarian plays, a sentiment that after a lengthy bloodletting applies to oil services ETFs.

“We believe sentiment is unlikely to deteriorate much further as it appears to be consensus that crude prices have further downside into the spring and Oil Service estimates need to take another step lower. At the same time, many of our discussions indicate that investors believe downside for the stocks is limited, likely reflecting the achievement of trough valuation multiples. The combination of remaining negative headwinds that impede action but limited downside based on valuation is, in our view, a mark that sentiment is near the trough,” said Citigroup analyst Scott Gruber in a note posted by Barron’s.

The analyst notes patient long- and medium-term investors can begin building stakes in oil services now, a thesis that will be bolstered if capitulation comes around for OIH, IEZ and the stocks held by those ETFs. However, the bottom fishing with oil services stocks trade is far from a free lunch.

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