The International Energy Agency has cut its oil demand growth forecast for 2008 to the lowest rate in 15 years, citing economic weakness and a spiraling liquidity crisis.

In a monthly report, IEA, adviser to 28 industrialized countries, reduced its 2008 demand growth forecast by 250,000 barrels per day to 440,000 barrels per day. This represents a 0.5% growth rate, the lowest in percentage terms since 1993.

Oil prices fell further after it was released to a one year low near USD 81 a barrel. But the IEA cautioned against too much focus on demand, saying the credit crisis would also impact investment in bringing on new oil supply. It added that already, world output fell by more than 1 million barrels per day in September 2008 partly because of storm disruption in the US Gulf.

Mr David Fyfe analyst at IEA said that "The key message is the downward adjustments in the demand numbers in line with the weaker economic prognosis. But we've also lost quite a lot of oil on the supply side in recent months."

World oil demand is expected to average 86.5 million barrels per day in 2008. The agency also lowered its growth forecast for 2009 as well, cutting the prediction by 190,000 barrels per day to 690,000 barrels per day. It said the impact of global economic weakness was most acute in developed countries while developing economies were showing a degree of resilience.