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Mitsui to Close Oil Trade Unit in Singapore

Mitsui & Co., Japan's second-biggest trading house, said on Thursday it will shut its Singapore oil unit by the end of March, after the unit lost $81 million in naphtha markets last year.

Staff at Mitsui Oil, including those on its large crude and fuel oil desks, had earlier said they would be fired as the company wound down operations within the next two months.

The closure had been expected after Mitsui Vice President Hiroshi Tada had said last month that the unit might be closed in April or May, but some industry sources had speculated that operations might be relocated to Tokyo or Hong Kong.

"To close it all and fire the staff would seem to be a little drastic. But the stain of the MOA name is something that they want to eradicate," a Singapore-based Japanese trader said.

A company source told Reuters that staff at the Singapore outfit were told at a meeting that the unit will close in about two months and that compensation terms would be discussed at a separate meeting in the afternoon. "We were told that the company will cease operations in two months' time and that we are being given two months' notice," said the source, who works in Singapore.

A company spokesman said settling all outstanding administrative and personnel issues may take until March 2008.

MOA's future was cast in doubt in November when Mitsui & Co. said it had discovered $81 million in losses on naphtha trades by a Singapore-based Japanese trader.

While Mitsui never officially identified the trader in question, numerous company sources and industry officials have said it was 35-year-old Noriyuki Yamazaki, MOA's only senior naphtha trader and one of the biggest players on the market.

Last year, MOA was on one side of about half of all trades in the benchmark Asian open-specification naphtha market.

The move was also signaled earlier this month when MOA terminated its agreement to lease much-coveted fuel oil storage space at a new terminal in Singapore.

While MOA ceased all derivatives trade in the wake of the naphtha losses, it had continued to trade physical crude and fuel oil from Singapore, while remaining an active naphtha market participant from its Hong Kong-based unit.