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.
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