Asian equities closed in the red 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.
In Asian trade, U.S. West Texas Intermediate (WTI) crude futures traded 7 cents or 0.19 percent higher at $37.72. Brent crude futures were also up marginally by 23 cents or 0.56 percent at $40.96, after hitting the lowest level since February, 2009 overnight.
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", on keeping production at current levels, "You can look at the statistics over at the U.S., that it is really hurting."
"Remember oil shale costs about $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."
U.S. markets closed in the red overnight. The 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 ended 40.5 points or 0.8 percent lower at 5,101.8.
Chinese market in red, trade, forex data in focus
Chinese markets closed in the red as November trade data remained weak. Exports fell by a worse-than-expected 6.8 percent on-year, marking the fifth straight month of declines. Imports, meanwhile, were down 8.7 percent on-year. There was a trade surplus of $54.10 billion.
The ended lower by 67 points or 1.89 percent at 3,470 while the smaller Shenzhen Composite was down 40 points or 1.78 percent lower at 2,221.
Chinese energy plays finished in the red between 1.87 and 3.04 percent.
Brokerages and bank shares were also down between 0.59 and 2.68 percent.
The Chinese yuan opened at its lowest level in three months. The People's Bank of China (PBOC) set the midpoint rate at 6.4078 per dollar ahead of the open. At market close, the yuan traded at 6.4181 against the dollar.
Data late Monday showed China's foreign exchange reserves fell to their lowest levels in over 24 months in November, renewing concerns over capital outflow from the economy. Foreign exchange reserves were down by $87.22 billion to $3.438 trillion by the end of November, according to the PBOC.
Japan, South Korea finish in the red
Japanese stocks were down as investor confidence slumped despite revised third quarter gross domestic product (GDP), the broadest measure of economic health, showing the economy was not in a recession.
The closed down 205 points or 1.04 percent lower at 19,492.
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 the previous estimate of a 1.3 percent decline.
Blue chip stocks ended the session in negative territory, with shares in Toyota, Sony, Mitsubishi Electric, and Toshiba down between 1.3 and 3 percent.
The yen traded at 123.08 against the dollar.
The South Korean market was down as well, with the Kospi ending 15 points or 0.75 percent lower at 1,949.
Shares in Samsung Electronics closed unchanged after trimming gains from the morning session while Samsung C&T fell in the red in the afternoon, closing 0.35 percent lower.
Samsung Engineering ended up 14 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 ($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 closes lower, energy sector weighs
The ASX 200 closed 47 points or 0.91 percent lower at 5,108, with the energy sector seeing losses of 6.35 percent as a result of low oil prices.
Shares in oil producer Santos closed down 13.12 percent.
According to reports, Woodside Petroleum officially withdrew its 11.64 billion Australian dollar ($8.46 billion) takeover bid of rival Oil Search to consolidate market position. Oil Search had already rebuffed the bid. Shares of Oil Search ended lower by 16.36 percent while Woodside was down 3.96 percent.
Resources stocks also traded in the red. Rio Tinto and BHP Billiton, Australia's two biggest miners, were down 4.29 and 5.23 percent. South32 saw heavy losses of 8 percent while Sandfire Resources was down 1.88 percent.
Iron ore producers pared early gains and were down firmly in the red. Shares in Fortescue Metal, Mount Gibson, BC Iron, and Atlas Iron traded lower between 2.78 and 7.32 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 0.46 and 1.65 percent.