Morning Commentary: Magnum Hunter preferreds decline amid crude’s price plunge; market softens

By Stephanie N. Rotondo

Seattle, Oct. 27 – Oil and gas preferreds were getting smacked down early Tuesday as ongoing supply glut concerns pushed crude oil prices down as much as 2.5%.

Also weighing on the commodity’s price was news that federal lawmakers had reached a budget deal late Monday. Under the terms of the deal, the United States would sell off some of its inventory in the Strategic Petroleum Reserve between 2018 and 2025.

If the proposed bill is officially approved by lawmakers, the sale would equate to about 8% of the country’s stockpiles. Proceeds would be deposited into the Treasury’s general fund.

In the wake of the news, names like Magnum Hunter Resources Corp. were taking a dive.

The 8% series D cumulative preferreds (NYSE: MHRPD) dropped 87 cents, or 32.58%, to $1.80 in early trades. The 10.25% series C cumulative perpetual preferreds (NYSE: MHRPC) weakened $1.10, or 29.02%, to $2.69.

Overall, the preferred market was mildly softer to start the day’s session.

The Wells Fargo Hybrid and Preferred Securities Index was off 1 basis point at mid-morning, though it had been lower closer to the open.

“People are still looking at where all the economic figures are and what the Fed is going to do,” a trader said. “It’s still a ‘state of the economy’ sort of thing.”

As for the central bank and its plans for interest rates, the trader said he “wouldn’t be surprised” if the rates lift-off was pushed back into 2016. However, he opined that any action would have to be taken in the first quarter “or else they run into the elections.”

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