The move by the relatively small operation comes as oil trading firms are hit hard by recent wild fluctuations - and record peaks - in crude oil prices.

Amid such uncertainty, trading of derivative contracts, such as futures contracts on oil prices, has slowed considerably.

'BNP Paribas confirms that the bank is relocating its Asian oil derivatives trading desk in Singapore to London,' a bank spokesman said in an e-mail statement to The Straits Times yesterday.

She declined to comment on the reason for the move.

Two traders were transferred last month and the third will be relocating to London soon, according to a Reuters report that cited industry sources.

Volatility in crude oil prices, which can swing by US$5 day to day, heightens trading risks and costs for traders, prompting companies to limit volumes traded.

An industry source said BNP's move was insignificant to the trading industry in Singapore as the bank has a very small desk.

Moving to the London office will give the traders a better market network, given the French bank's bigger base of operations there.

The move is the latest in a series of consolidation measures seen in the local oil trading industry as a result of sluggish trading.

Oil trading volume is estimated to have shrunk up to 30 per cent during the first half of this year.

European bank Fortis last month scrapped its plans to open a derivatives trading desk in Singapore, and instead relocated its two traders to Houston in the United States.

At least two oil trading firms - Projector Asia and Russian-based Highlander - are believed to have shut down operations in the Republic to cut trading losses and save on overhead costs.

'The last six months has been a very difficult period because of the volatility in the market. Oil price has gone to levels not seen before,' said a source who declined to be named. 'Who dares to take outright positions now?

'Most of the investment banks got hit. It makes trading very difficult. Margin calls are imminent.'

While Singapore is the third-largest oil trading hub in the world after New York and London, trading in oil derivatives has yet to catch on in a big way in Asia.

The oil derivatives market has not grown as much as expected in recent years despite China's rapid expansion, said oil industry consultant Ong Eng Tong.

Higher costs of operations in Singapore may have further justified the decision to move out, he added.

Oil derivatives trade between Asian counterparties was valued at about US$300 billion (S$413 billion), a small fraction of the US$14 trillion to US$16 trillion traded globally in 2005, latest available figures show.

yanghw@sph.com.sg