Mitsubishi's Singapore unit loses US$320m in rogue oil trades

Cornelia Mascio
Settembre 21, 2019

Mitsubishi Corp. (OTCPK:MSBHY) falls 3.3% after disclosing that its Singapore-based crude oil and petroleum products trading unit expects to book a $320M loss from unauthorized trades in derivatives.

The Japanese motor manufacturer reported the losses in a statement on Friday, in which the company said the employee had been working for a subsidiary called Petro-Diamond Singapore (PDS) to oversee oil trade with China.

Mitsubishi Corp said the derivatives position was quickly closed and investigations were carried out at the subsidiary, other group companies and in-house departments involved in derivatives trading.

Mitsubishi, considered a staid trading house typically not involved in high-risk transactions, says it has taken measures to tighten oversight. The company also revealed that it dismissed the rogue trader on Wednesday and filed a complaint with the Singapore Police.

Mitsubishi began probing the trader's work in August after a drop in oil prices in July. Mitsubishi said investigations confirmed that its unit had "sufficient internal controls in place". The company was founded in 1954.

It could be the biggest loss in oil markets since China's Sinopec Corp said a year ago it had lost about $700 million on crude hedging. In August, the giant trading house forecast full year net income of 600 billion yen (S$7.7 billion).

"It's a bit surprising (because) in the Japanese houses there are a lot of checks and double-checks but I'm not sure what automated compliance systems there are, or if they have any", said one long-time trader in the Asian market, who has worked at a Japanese trading house. Last year, Chinese state oil giant Sinopec suspended two top officials at its trading arm Unipec after US$656 million in losses.

Another Japanese trading company, Mitsui & Co., was forced to close its Singapore oil-trading unit in 2007 after a trader lost US$81 million in hidden naphtha trades. Profit totalled more than $5 billion in the year through March 2019.

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