* Sells up to 14 mln barrels of diesel and naphtha
* Saudi Aramco boosting trading clout in Asia.
* S-Oil gets paraxylene, heavy naphtha from Aramco's trading arm
* S-Oil says contacts valid for Feb. 1-Dec. 31, 2015
* Deal underlines expanding Aramco's trading work -traders (Adds comment from traders, detail)
By Kahyun Yang and Meeyoung Cho
SEOUL, Feb 9 (Reuters) - South Korean refiner S-Oil Corp has sold 1.2 trillion won ($1.09 billion) of oil products to a trading arm of its top shareholder, Saudi Aramco, as the Middle East oil giant boosts its trading clout in Asia.
The deal, the largest ever between the two firms, comes after state-run Saudi Aramco increased its holding in S-Oil last month to 63.41 percent from 34.99.
S-Oil said in a statement to the stock exchange that it will supply up to 14 million barrels of diesel, including ultra-low-sulphur diesel and low-sulphur diesel, and up to 14 million barrels of light naphtha to Saudi Aramco Products Trading Co under the contract valid between Feb. 1 and Dec. 31 of 2015.
A S-Oil official said the deal, equivalent to 3.9 percent of the refiner's total sales volumes in 2013, is the largest between the firms since Saudi Aramco Products Trading was set up in 2012. S-Oil buys almost all of its crude from Aramco.
"This contract is seen to hike S-Oil's domestic and overseas competitiveness as it will secure stable overseas sales markets and receive required raw materials via a subsidiary of the major shareholder Aramco," S-Oil said in a separate statement.
South Korea's third-biggest refiner, a major Asian diesel exporter, in December scrapped tenders offering 2015 term contracts in a move taking traders by surprise.
The premium for the naphtha deal with Armaco was unclear.
S-Oil used to sell most of its naphtha to Japan.
S-Oil said that it will receive 120,000 tonnes of paraxylene and 2 million barrels of heavy naphtha from Saudi Aramco Products Trading with output of both expected to drop due to maintenance shutdowns this year.
A Singapore-based trader said the deal showed how Aramco was expanding its trading presence in Asia, while another industry source said the firm may set up a trading office in the island state.
Aramco, which used to sell most of its own naphtha from the Middle Eastern refineries on a free on board (FOB) basis, has become a key spot seller of naphtha and is now exporting diesel from its new joint venture refineries in Saudi Arabia as well as more active in derivatives trading. [ID: nL3N0SB493] ($1 = 1,099.2000 won) (Additional reporting by Jessica Jaganathan and Lipeng Seng in SINGAPORE, Writing by Meeyoung Cho,; Editing by Himani Sarkar and Ed Davies)