PARIS (AP) -- The International Energy Agency made new cuts Friday to its global oil demand forecasts for this year as economic conditions in developed nations worsened amid financial turmoil and inflation, and said demand would weaken further in 2009.

The agency said that tight credit conditions were also beginning to crimp supply, not just demand, by slowing the pace of investment by oil producers.

In its monthly report, the Paris-based energy watchdog cut its forecast for oil demand this year by 240,000 barrels per day, and slashed its 2009 forecast by 440,000 barrels per day. The IEA now expects global oil demand to total 86.5 million barrels per day this year and 87.2 million barrels per day next year.

The IEA cited "rapidly weakening economic conditions, financial turmoil and high prices" as having a "marked" impact on oil demand in developed nations belonging to the Organization for Economic Cooperation and Development, especially the United States.

The revised figures came on top of cuts the IEA made last month, and leave the forecast for global oil demand growth at 0.5 percent this year and 0.8 percent next year.

The forecast cuts were based on the latest global economic outlook from the International Monetary Fund, which slashed nearly a percentage point off expected global GDP growth for 2009 as developed economies slide into or toward recession.

The financial crisis is also having an impact on the supply side of the oil industry, the IEA noted.

"Credit shortages are rapidly becoming yet another in a long line of impediments to industry investment," the IEA said.

Tightening credit and equity markets will slow the pace of investment, the IEA said, "with independent producers and, potentially, several Russian operators seen as particularly at risk."

The IEA said that while most large independent oil companies and state producers "should weather the financial storm," investment is already being affected at highly leveraged companies in Russia and the Caspian Sea area.

The IEA forecast a "renewed phase of industry consolidation" as financially strapped independent oil companies have trouble raising capital through share offerings.

The organization highlighted two worries behind what it called a "full-blown economic crisis" -- the possibility that the slowdown in advanced economies will spread to the developing world, and the effect that the virtual lockup in credit markets is having on liquidity in oil markets, leading to more volatile price swings.

Oil prices plummeted to a one-year low below $83 a barrel Friday in Asia as investor fears of a severe global economic downturn sparked a panicked sell-off of equities and crude.

Light, sweet crude for November delivery was down $4.00 to $82.59 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore, the lowest since October 2007. The contract overnight fell $1.81 to settle at $86.62.