Occidental Petroleum Corp (OXY.US) Chief Executive Vicki Hollub said on Monday that the oil market will face supply shortages by the end of 2025 because the world cannot replace current crude reserves fast enough. About 97 percent of the world's current oil production was discovered in the 20th century. Hollub added that less than 50 percent of global crude oil production has been replaced over the past decade. "We will be very short of supply in a few years," she says.

At the moment, Hollub said, the market is oversupplied, which is pushing down oil prices, despite the conflict in the Middle East. Oil production in the United States, Brazil, Canada and Guyana has hit record highs as demand slows.

But Hollub said the outlook for supply and demand would reverse by the end of 2025.

"The market is out of balance right now, but this is a short-term demand issue," Hollub said. "But the market will face long-term supply problems."

Opec forecasts that global oil demand will increase by 1.8 million barrels per day in 2025, more than the 1.3 million barrels per day of crude oil production growth in countries outside Opec. The forecast implies that unless Opec abandons its current production cuts and raises its own output, the market will be in short supply.

On Monday, WTI crude for March delivery closed up 0.69 percent at $72.78 a barrel as risks in the Middle East intensified. Brent crude for April delivery rose 0.85 per cent to settle at $77.99 a barrel.