There really is no need to feel bad at all. You never knew him, that isn't your fault. I'm completely confident that if he is looking down, that he completely understands why you wouldn't feel bad about losing him. He may have been your relative, but only word wise, not by relationship wise. It doesn't mean you're a bad person at all - it simply means you're normal. You can't force your feelings on anything - they are either there, or they aren't. Ask yourself this - if you knew him, if you were close with him, if he was involved in your life, would you still feel the same way, or would you feel like you think you should be feeling right this very second?
I'm willing to bet that you'd be upset - because you knew him. He was family, relationship wise, not word wise. Surely you see this? Talk with your parents about it - I bet they will agree with exactly what I've said here to you. The normal reaction when losing someone you didn't know is to feel remorse for the death, but not remorse as far as the death of a family member goes.
Don't be hard in yourself. Everyone will experience this as one time or another in their life. No one knows everyone in their entire family tree - and they won't feel a great deal of sadness when someone they don't actually know passes away. You aren't cold or heartless, I assure you.