Preferreds up in early trades, erase gains by the bell; oil volatility moves preferreds

By Stephanie N. Rotondo

Seattle, Dec. 9 – After posting modest gains in early trading, the preferred stock market retreated again during the midweek session.

A trader remarked that he was not sure what was initially driving the space higher, though he opined that “maybe it’s the rebound in oil.”

The Wells Fargo Hybrid and Preferred Securities index finished down 3 basis points, after being up 6 bps at mid-morning. For its part, domestic crude oil prices closed slightly lower, though they were up over 1% earlier in the day, nearing $38 a barrel.

The trader further speculated that the morning’s gains in the commodity were due to it being “oversold.”

Around midday, 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.

Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) weakened by 38 cents, or 6.34%, to $5.61. At mid-morning, the units were up 64 cents, or 10.68%, at $6.63.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) also fell, dropping just a penny to $6.38. In earlier trading, the units were up 12 cents, or 1.88%, to $6.51.

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