Distressed oil, gas bonds climb as crude gyrates; steel names firm; iron, coal names drop

By Stephanie N. Rotondo

Seattle, Dec. 9 – The beaten-down commodities market rallied in midweek trading, according to distressed debt sources.

The gains came as prices for basic materials improved on the day, resulting in speculation that the space might have been oversold recently.

However, not all commodities managed to hold on at the higher levels, as domestic crude oil prices erased earlier modest gains to end just slightly weaker.

The gyrations came as the U.S. Energy Information Administration released its weekly stockpile report, which showed that crude oil inventories declined by 3.6 million barrels last week.

Analysts polled by Reuters had forecast a 300,000-barrel build for the week.

However, distillate inventories increased by 5 million barrels, which was double what was forecast and the biggest build up seen since January.

All the while, seasonal demand fell to its lowest point since 1998.

Still, oil and gas producers got at least a small boost for the day.

Chesapeake Energy Corp. – which has been weakening ever since the company announced a private exchange offer for 10 series of notes maturing 2017 through 2023 – even rebounded, as a trader saw the 6½% notes due 2017 rising 4 points to 35 5/8.

He also saw the 5¾% notes due 2023 inching up a point to 28 5/8.

A second market source placed the 6 5/8% notes due 2020 at 33 bid, a gain of 2 points on the day.

Energy Transfer Partners LP was another gainer, according to a trader. The trader pegged the 5½% notes due 2027 at 79, up over 2½ points.

The steel space was also on the rise.

A trader said United States Steel Corp.’s 7 3/8% notes due 2020 firmed up over half a point, ending at 50¼. Another source placed the company’s 7% notes due 2018 at 63½, up 1½ points.

As for AK Steel Holdings Corp.’s 7 5/8% notes due 2020, the second source deemed the issue up almost 2 points at 32¼.

Iron, coal weaken

But while oil and gas and steel were looking to rally, iron and coal names did not follow suit.

A trader said Cliffs Natural Resources Inc.’s 6¼% notes due 2040 closed at 16¾. That was half of what they were in the last round-lot trades in September, he said.

“I hadn’t seen them trade in months,” he said.

The 4.8% notes due 2020 also finished at nearly half of where they were a month ago, as the trader placed the issue at 16½.

That compared to levels around 30 in early November, the trader said.

Among coal bonds, Consol Energy Inc.’s 5 5/8% notes due 2022 came in a touch to trade at 64.

“They trade constantly around that 64 level,” a trader said.

Meanwhile, Arch Coal Inc.’s 7¼% notes due 2021 softened “just about a quarter-point” to 1 7/8, a trader reported.

© 2015 Prospect News.
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