Mitsubishi Singapore oil trading arm loses $320 on rogue derivative trader

25, Sep. 2019

SINGAPORE, NNA - Petro-Diamond Singapore (Pte) Ltd. (PDS), a wholly-owned Singapore-based oil trading subsidiary of Japanese trading house Mitsubishi Corp., is expected to book a loss of about $320 million due to unauthorized crude oil derivatives transactions.

A locally hired PDS employee of Chinese nationality, charged with handling crude oil trade with China, repeatedly engaged in unauthorized derivatives transactions since January this year, Mitsubishi Corp. said in a statement on Friday.

By manipulating data in PDS’ risk-management system, the employee disguised the transactions to look like hedge transactions with actual PDS customers. Since July, the price of crude oil has been declining, resulting in substantial losses from derivative trading, the statement said.

PDS investigated the employee’s transactions and discovered the unauthorized practices when the employee was absent from work in August, the statement said.

The company fired the employee on September 18 and lodged a criminal complaint against the employee the next day for violating internal rules and laws to cause a “significant loss” for PDS, it added.

PDS is the process of examining the total amount of losses including related costs, the statement said, adding that how the losses will impact Mitsubishi Corp.’s forecast for fiscal year 2019 is under investigation.

“In the immediate future, PDS will continue its business with support from its parent company and others,” a Mitsubishi Corp. spokesman told NNA.

In Singapore, Mitsui Oil (Asia) Pte. Ltd., a subsidiary of another Japanese trading house Mitsui & Co., incurred losses worth about $89 million in naphtha-related trading in 2006. The unit was later liquidated.