Since the second half of 2014, international crude oil prices have plummeted. International oil prices remain at a relatively low level, and retail prices of refined oil products once experienced "thirteen consecutive declines." The prices of fuel oil and liquefied petroleum gas (LPG) also fell in line with crude oil. The decline in these energy prices has nearly eliminated the economic advantage of natural gas; incremental natural gas prices are expected to be reduced in 2015.

2. Our analysis and judgment

(One), incremental natural gas prices since the price adjustment in 6 of 2013 are expected to be reduced

In the natural gas price adjustment notice issued by the National Development and Reform Commission in 6 of 2013, the gate station price of incremental natural gas was adjusted according to the pricing method in the pilot schemes for Guangdong and Guangxi at the end of 2011, adjusted in one step to the level of 85% of the 1-year average price of alternative energy sources since the second half of 2012, that is, formulated at 85% of the prices of imported fuel oil and liquefied petroleum gas from the second half of 2012 to the first half of 2013 (with weights of 60% and 40%, respectively).

Brent crude oil prices plummeted by 60% from 110 USD/barrel to around 50 USD/barrel, due to factors such as supply-demand imbalance, US dollar appreciation, and geopolitical rivalry between major powers like the US and Russia. OPEC's decision last 11 month to abandon production cuts has prolonged the time required for crude oil prices to return to equilibrium levels. A significant rebound in oil prices would require production cuts from suppliers such as Russia, OPEC, and US shale oil. Positive factors for a recent oil price rebound are beginning to emerge: the political crisis in Ukraine has eased, and the number of oil rigs in the US has decreased significantly since the beginning of this year, by approximately 24%. However, US crude oil production remains high at 920 million barrels per day without declining, and US commercial crude oil inventories have hit a new historical high, exceeding 4 million barrels. Crude oil prices may still fluctuate and test lower lows again. We believe that there is strong support for crude oil at 40 USD/barrel. It is difficult for the current low oil prices to persist for a long time; prices are expected to bottom out in the first half of this year, and the future equilibrium oil price will recover to around 80 USD.