Montreal, Canada

Large-cap oil drilling stocks have now plunged almost 30% since May 1st and continue to lose technical support this morning following Obama’s flip-flop on oil drilling in the Gulf of Mexico. OIH, or the Oil Services HLDRs, has declined 18.4% in 2010 and is down 13.5% over the last 12 months.

The President has imposed a six-month moratorium on Gulf drilling following the biggest oil spill in U.S. history. BP, which runs the crippled rig, still can’t plug the leak. Analysts project the spill might be ten times greater than the 1989 Exxon-Valdez disaster.

Since the advent of the energy bull market in 2003, no other sub-sector of the energy complex has produced greater total returns than oil services companies. Tuesday was a market massacre for some of the biggest names in the business – including Schlumberger (NYSE-SLB), Halliburton (NYSE-HAL) and Diamond Offshore Drilling (NYSE-DO) to name just a few of the casualties. Smaller drillers listed on the NASDAQ where pulverized, declining more than 10%. My Commodity Trend Alert (CTA) service, which holds just one driller, was stopped-out last night.

However, some of these oil services companies, which don’t have significant drilling activity in the region, have been smashed badly over the last two weeks following the BP-Transocean explosion and subsequent oil spill. The good have been thrown out with the ugly. This makes the current environment a buying opportunity for those companies focused elsewhere outside of the blackballed Gulf of Mexico.

The way the market is reacting to the ban on Gulf drilling implies the entire sector is on the road to banishment. Of course, that’s not the case. Some of these companies that drill outside of the United States have been hit pretty hard in sympathy with their U.S. peers and deserve a close look as they touch 52-week lows. That’s the focus of CTA over the next few weeks as we delve deeper into the carnage now engulfing the oil drilling sector.