Japan Mitsubishi says to wind down derivatives unit

By James Topham and Luke Pachymuthu

TOKYO/DUBAI, Nov 9 (Reuters) - Energy firm Petro-Diamond Risk Management Ltd said on Monday it will close its global derivatives operations, looking to end its role as market maker in the volatile oil trade hedging business.

Mitsubishi Corp (8058.T), Japan's top trading house, and the firm's parent, decided to wind down the business on Oct. 29, and soon after began notifying Petro-Diamond Risk clients it will honour all its deals through March 2012, said a London-based official with the unit, who is authorised to speak to the media.

It has yet to decide how deals that mature after that date will be handled, the official told Reuters. They could be handled by other energy traders or separate Mitsubishi entities, depending on the client's preference, the official added.

The official said the company did not rule out the possibility that the subsidiary would be sold to a third party.

"Following last year's credit crunch, the group has taken a long hard look at businesses within its portfolio, and just sees Petro-Diamond as a derivatives vehicle that doesn't fit with its portfolio," said the official with Petro-Diamond Risk Management.

It was not immediately known how many staff of the firm that has offices in London, New York and Tokyo, would be affected.

Mitsubishi has another unit, Petro-Diamond Singapore, a separate entity which continues to trade physical oil products.

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