Global oil prices to remain bearish

Slower economic growth in emerging economies like China, Brazil and Russia will keep global crude prices and demand depressed this year, a leading think tank said on Tuesday.

According to the industry blue book released by the China Petroleum Enterprise Association and the China University of Petroleum on Tuesday, benchmark Brent crude prices will fluctuate between $80 and $100 a barrel while the West Texas Intermediate prices will hover around $75 to $95 a barrel this year.

The Organization of Petroleum Exporting Countries, or OPEC, led by Saudi Arabia, will continue its stable supplies to the global crude market, together with the United States' shale gas output, which will result in a crude supply glut.

According to data from the US Energy Information Administration, the US had daily crude output of 7.44 million barrels in 2013 and it grew to 8.60 million barrels a day in 2014. The administration expects the US to produce 9.32 million barrels a day this year.

Meanwhile, Saudi Arabia, Russia, Iraq, Iran and Syria have all been forced to increase crude output to maintain their market share and to make up for income decline.

Dong Xiucheng, a professor with the China University of Petroleum and one of the authors of the blue book, said another major factor that will contribute to the global supply glut is China's rising shale gas output.

In 2014, China started commercial shale gas production in southwestern Sichuan province and Chongqing city, which will lessen the country's reliance on global crude imports to some extent.

"However, our research team is a bit more optimistic than other analysts on crude prices," Dong said, adding that the global crude price will stay below $80 a barrel in the short term, but will improve in the long run.

Peng Yuanzheng, vice-chairman of CPEA, said oil demand growth in China will slow further in 2015 due to the lower GDP growth expectations - at around 7.2 percent.

China's refined oil market, on the other hand, will have sufficient supply this year. Exports of refined oil will increase while import growth will decline, Peng said.

The growth in refined oil exports is due to the overcapacity of the domestic refining sector. At present, China's refining capacity is around 714 million metric tons a year. In addition, another 271 million tons of refining capacity is being built.

China should use the low crude price situation to increase strategic oil reserves by encouraging private companies to participate in stock capacities construction.

The blue book also suggested that State-owned oil companies should cut production by a reasonable scale and increase imports. Oil companies can also make use of the situation to acquire good foreign assets or consider mergers opportunities to cut costs and boost efficiency.