OPEC Secretary-General Mohammad Barkindo on Tuesday urged oil producing companies to increase capacities and invest more to meet future demand as spare oil capacity shrinks worldwide.
Oil prices have rallied this year on expectations that U.S. sanctions on Iran will strain supplies by lowering shipments from OPEC's third-largest oil producer. Brent crude breached four year highs to reach $86.74 a barrel earlier this month, the highest since 2014.
"Countries that are holding spare capacity are now shrinking because there has been less investment in exploration," Barkindo said on the sidelines of the IHS CERA conference.
The global oil sector needs about $11 trillion in investment to meet future oil needs in the period up to 2040, Barkindo said, adding that import-dependent countries such as India were concerned about future oil supply.
Crude oil demand is expected to increase by 14.5 million barrels per day (bpd) from 2017 to 111.7 million bpd in 2040, OPEC said in its September report.
Saudi Arabia, the de facto leader of OPEC, is the only oil producer with significant spare capacity on hand to supply the market if needed, and the kingdom plans to invest $20 billion in the next few years to possibly expand its spare oil production capacity.
Barkindo said the oil markets were currently adequately supplied and balanced, but cautioned against a potential imbalance in 2019 due to higher supply.
"We will continue to ensure that the balance that we have attained after four years will be sustained going forward," he said.
Members of OPEC and non-OPEC countries participating in a supply-reduction agreement are on course to reach 100 percent compliance, Barkindo said, calling it a "work in progress."
OPEC and allied producers - not including the United States - agreed in June to return to 100 percent compliance with output cuts that began in January 2017, after months of underproduction in Venezuela and elsewhere pushed adherence above 160 percent.
India is expected to account for about 40 percent of the overall increase in global demand for the period ending 2040, Barkindo said. Demand for oil in the world's third-largest oil importer is expected to rise by 5.8 million barrels per day (bpd) by 2040.
"India is projected to see the largest additional oil demand (3.7 percent per annum) and the fastest growth in the period to 2040," said Barkindo in his speech to the conference.
Indian officials have flagged worries about the outlook for crude supply though oil producers have downplayed a potential shortfall.
India, which imports more than 80 percent of its oil needs, shipped in 4.2 million barrels per day (bpd) of crude in 2017.
India has sought easier payment terms from oil suppliers to combat higher crude prices.
Retail fuel prices in India recently touched record levels due to high oil prices and a weakening rupee, leading to protests across the country.