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It's beginning to look a lot like Christmas, just not in the heating oil market.

US retailers are trying to jump-start holiday buying early this year, moving from the goblins and witches straight to the over-sized ornaments and eggnog flavored lattes.

Heating oil bulls looking for some holiday cheer aren't going to find it in the crack spreads. The December NYMEX heating oil crack spread settled at $6.44/barrel on November 16, the January 2010 crack at $7.41/b and the February 2010 at $7.94/b. By comparison, on November 17, 2008, the December 2008 NYMEX heating oil crack settled at $20.27/b, the January 2009 at $20.49/b and the February 2009 at $20.48/b.

With more and more signs emerging all the time of an economic recovery taking root around the world, it was never going to take long before world oil demand forecasts started to look a bit more optimistic.

In its latest monthly report released November 12, the International Energy Agency confirmed this, raising its estimate of world demand in 2010 by 140,000 b/d to 86.19 million b/d.

The world of oil is in for a roller-coaster ride over the next few years if Deutsche Bank analysts are right, with oil demand set to peak in just seven years' time as crude spikes again, this time to $175/barrel, before falling into long-term decline.

It won't be a case of oil running out, however. Rather, the world will become much more efficient in its use of energy. But in the next few years, Deutsche predicts, we will see a lot of volatility and even more chronic under-investment in production capacity.

Steadily diminishing OPEC compliance with last December's 4.2 million b/d output pact is turning out to be no big deal in light of rising hopes that the world economy may finally be on the path to recovery.

The latest Platts estimates show total OPEC production in September at 28.83 million b/d and output from the 11 members bound by quotas at 26.33 million b/d, up 40,000 b/d and 90,000 b/d respectively from August. OPEC's own estimates, derived from secondary sources, put the September volumes even higher -- 28.9 million b/d for all 12 members, including Iraq, and 26.42 million b/d for the OPEC-11, minus Iraq.

Cautious optimism best describes the International Energy Agency's latest assessment of the world oil market, which suggests an upturn in oil demand is just around the corner.

On October 2nd, Russia was declared world's largest oil producer in terms of September production, courtesy of OPEC's own statistics.

This wasn't the first time its production had nudged ahead of Saudi Arabia's. Since August 2006 it's been in the statistical lead often. Even the US Energy Information Administration describes Saudi Arabia as the world's second largest crude oil producer after Russia. What was a more significant first was that Russian production exceeded 10m bpd (10.01) in September. That was a record for Russia and certainly close to Saudi Arabia's production high.

Lost in the financial chaos of the 2009 downcycle is the emergence of what appears to be a fundamental change in the way the industry deploys rigs for land drilling in North America. That change will result in a need for fewer rigs once the industry shakes off the recession and returns to work, according to a handful of analysts, led by Jim Crandell at Barclays Capital.