The story is simple. After reaching record highs at the end of July, crude oil prices have come crashing back down to earth because of slowing global economic growth. The commodities ‘bubble’ is over. The risk of catastrophic global inflation has been averted.

Jason Simpkins in Money Morning disagrees. He says the crude-oil sell-off that sparked a stock-market rally over the last four weeks may not last.

What Big Media has failed to notice is that OPEC is already gearing up to cut production….

OPEC, the cartel that controls roughly 40% of the world’s oil supply, pushed its production to the highest level in its 48-year history in July after being criticized for doing too little as the oil bull went on a year-long rampage – causing oil prices to reach an all-time high of $147.27 on July 11.

The production increase was led by Saudi Arabia, which – after a visit from U.S. President George W. Bush – boosted its production from 9.4 million barrels per day (bpd) to 9.7 million bpd, the highest level in 30 years. Higher production from Iran also helped push OPEC’s total output to 32.8 million bpd.

However, as economic growth stagnated in the developed world and cash-strapped American consumers cut back on expensive gasoline purchases, that production increase turned into a glut and oil prices plunged by more than $30 a barrel.  Now that crude is down significantly from its record peak, OPEC is getting ready to take some of the excess supply off the market.

In its August Monthly Oil Market Report, the cartel lowered its global demand forecast to an average of 32.05 million bpd. In July, OPEC said demand for 2008 would average 32.64 million bpd.

“The softening economic situation has led to a further slowdown in oil demand growth,” the cartel said. “Oil demand growth will be on the decline in 2009 which will make the world demand growth the lowest since 2002.”

This bleak outlook could foreshadow a series of production cuts, not just for this year, but in 2009, as well. Here’s a key reason why: Falling oil prices are expected to cost OPEC about $176 billion in lost export revenue over the next two years, the International Energy Agency reports.

Net oil exports from the 13-member OPEC nations are projected to hit a record $1.172 trillion this year, the IEA said. While the total dwarfs the $671 billion the cartel raked in last year, it’s still $79 billion less than the EIA forecast in July. The IEA said OPEC would bring in $1.225 trillion in 2009, $97 billion less than last month’s prediction.

Source: With OPEC Planning to Cut Production, the Decline in Oil Prices May Not Last