Asian equities markets traded cautiously on Tuesday after oil prices fell more than 5 percent overnight.

Oil prices suffered a sharp decline during U.S. trading as a result of a global supply glut. The Organization of the Petroleum Exporting Countries' (OPEC) failed to reach an agreement to reduce production levels when it met on Friday.

Instead OPEC oil ministers dropped any reference to the group's output ceiling for the first time in decades. This highlighted disagreements among members on how to accommodate Iranian oil supply in the market once Western sanctions are lifted.

The US West Texas Intermediate (WTI) crude futures were down USD 2.32 or 5.8 percent at USD 37.65. Brent crude futures fell USD 2.30 or 5.4 percent at USD 40.71, hitting the lowest level since February, 2009.

Analysts agree that overproduction by OPEC is hurting the U.S. market and alternate sources of energy such as shale.

Jonathan Barratt, chief investment officer at Ayer Alliance Securities told CNBC's "Asia Squawk Box", said of keeping production at current levels, "You can look at the statistics over at the US, that it is really hurting."

"Remember oil shale costs about USD 60 a barrel to produce. It's not profitable," Barratt added. "When you look at the Baker Hughes rig counts, it's 61 percent lower than last year. When you look at exploration in oil, that's 71 percent lower."

US markets closed in the red overnight. The Dow Jones Industrial Average was down 117 points or 0.66 percent to 17,730.5. The S&P 500 lost 14.6 points or 0.7 percent at 2,077 while the Nasdaq ended 40.5 points or 0.8 percent lower at 5,101.8.

Japan, South Korea flat in morning trade

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The Japanese market traded marginally higher after Japan's revised third quarter gross domestic product (GDP), the broadest measure of economic health, showed the economy was not in a recession.

Reports showed the revised Q3 GDP grew 1 percent on-quarter, on an annualized basis. The number beat previous estimation of a 0.8 percent contraction during the same period. The capital spending component saw an upward revision of 0.6 percent on-quarter against an estimated decline of 1.3 percent.

The Nikkei 225 was up 12 points or 0.06 percent at 19,709.

Blue chip stocks traded mostly in negative territory, with shares in Toyota, Sony, Mitsubishi Electric, and Toshiba down between 0.2 and 1.53 percent.

The yen traded higher against the dollar at 123.21.

The South Korean market traded flat, with the Kospi up 1.6 points or 0.08 percent at 1,965.

Shares in Samsung Electronics and Samsung C&T were up by 0.48 and 1.05 percent.

Samsung Engineering was up 23 percent after Reuters reported Jay Lee, heir to the Samsung Group and also vice chairman of Samsung Electronics, will buy up to 300 billion won worth of shares in the company if its rights issue was not fully subscribed.

The struggling firm had earlier announced a 1.2 trillion won (USD 1.02 billion) rights issue.

The broader Samsung Group also faces a probe from South Korea's financial regulatory body on allegations of insider trading and market manipulation during the merger of Samsung C&T and Cheil Industries earlier this year. A report by local Yonhap news agency said nine executives linked to the merger were being investigated.

ASX trades lower, energy sector weighs

The ASX 200 traded 31 points or 0.6 percent lower at 5,124, with the energy sector seeing losses of 6.59 percent as a result of low oil prices.

Shares in oil producer Santos was down as much as 11 percent in morning trade.

Reports on Tuesday said Woodside Petroleum officially withdrew its 11.64 billion Australian dollar (USD 8.46 billion) takeover bid of rival Oil Search to consolidate market position. Oil Search had already rebuffed the bid. Shares of Oil Search was down 16 percent while Woodside was down 4 percent.

Resources stocks also traded in the red. Rio Tinto and BHP Billiton, Australia's two biggest miners, were down 2.35 and 3.92 percent. South32 saw heavy losses of 5.58 percent while Sandfire Resources was down 2.82 percent.

Among iron ore producers, Fortescue Metal and Mount Gibson saw gains between 0.27 and 1.4 percent.

Evan Lucas, market strategist at spreadbetter IG, said in a note there was a growing gap between the ASX 200 and commodities "built on the back of the moves in the financial services space, which now encompasses 48.7 percent of the ASX, with the banking sector making up 30.2 percent of the ASX."

Lucas added, "The materials space makes up 12.1 percent; energy 4.5 percent – it is clearly no longer a commodities index."

Major banking stocks were down between 0.47 and 0.8 percent.

First Published:Dec 8, 2015 7:45 AM IST