UPDATE 1-Statoil mulls closing Asia oil product trade arm-source

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By Jennifer Tan

SINGAPORE, Nov 20 (Reuters) - Statoil Asia Pacific, trading arm of Norway's StatoilHydro ASA (STL.OL), is considering closing its oil products trading division, industry sources said on Thursday, as trading activity slows amid the global financial crisis.

But the sources said the move could be restricted to trading of products, and might not affect its crude operations.

When contacted, a Statoil Asia Pacific spokeswoman declined to comment.

Two industry sources said Statoil was likely to close its products division, which has four staff in Singapore, and make a formal announcement soon.

The company trades middle distillates and fuel oil in the Singapore oil trading hub.

A trading source said the products division was "under evaluation" and details would be unveiled "pretty soon".

The worst financial crisis in over 80 years has crippled liquidity in commodities and energy markets and the subsequent plunge in trading volumes has forced many brokers and traders to hunt for new revenue streams or wind down operations.

French bank BNP Paribas (BNPP.PA) recently shut its Asian oil derivatives trading desk in Singapore and relocated the three-men team to London, due to the dull trading environment.

Dutch-Belgian bank Fortis (FOR.AS), which brought at least two traders on board last year in Singapore with plans to open a derivatives trading desk, gave up on the idea this year and relocated its traders last month to Houston.

Last month, brokerage GFI Group (GFIG.O) also shut its Asian fuel oil and crude units, just weeks after announcing it would end an Asian joint venture with Spectron.

But it is not all gloom in the industry. Firms such as Arcadia and Mercuria are expanding their Asian trading operations. In May, five senior oil traders from Projector Asia left the company to join Arcadia in Singapore.

Others are also revising their trading strategies, on hopes that new markets could help take up the slack. (Editing by Ramthan Hussain) (jennifer.tan@thomsonreuters.com; +65-6417 4679; Reuters Messaging: jennifer.tan.reuters.com@reuters.net)