Signs that countries are buckling under the burden of $120 oil prices became clearer on Tuesday as the International Energy Agency slashed its forecasts of oil demand for this year.

The developed countries’ energy watchdog now expects world demand to grow by 1.2 per cent, to 86.8m barrels a day, in 2008. This month’s 390,000 b/d revision was the fourth in a row, but the IEA warned there could be more to come as better data emerged.