Today could be quite a wild day in the oil markets. We’ll see the release of critical inventory and production data from the Department of Energy at 10:30 A.M. EDT. Meanwhile, crude oil futures are already up some $1.60 bbl to $64.53 bbl in overnight electronic trading. Gasoline and heating oil futures have already advanced some 2.5-4cts gal. The gains are tied to the news that the United Kingdom has frozen bilateral talks with Iran until the fifteen detained U.K. sailors are released.

   Last night at about 5 P.M. EDT, oil futures soared $5 bbl in electronic trading when a rumor spread through financial circles that there had been a military action involving Iran and either the U.K. or U.S. in the Persian Gulf. When the State Department disavowed any knowledge of an incident, prices gave up about 75 percent of that gain. But the morning begins with gasoline futures at their highest level since mid-August 2006, and considerably above yesterday’s close. .

   I still believe that we are nearing the grand finale of this preseason gasoline rally, but clearly the Persian Gulf needs to be watched closely. In any case, there will certainly be another 10-15cts gal of “catch-up” moves coming at the pump between now and Easter Sunday. The nationwide average today stands at $2.60 gal, and the $2.75 gal level that I targeted as a possible preseason peak could be reached in the next two weeks. There are about thirteen states that still have street prices below $2.50 gal, and those numbers may disappear by this weekend.

    For details of prices, visit the AAA website at www.fuelgaugereport.com

   The $2.70-$2.75 gal target level for the nationwide average now looks like a lay-up. But the $3.00 gal number that pushes street prices onto the front page is, in my view, still looks like hyperbole. What happens with Iran and the U.K., and what happens with this morning’s DOE numbers may well determine whether I’ll save face on these predictions.

   Meanwhile, diesel is really kicking harder. The nationwide average will surpass $2.76 gal this evening and I expect that diesel will be more expensive than gasoline more often than not through the remainder of the year.