Welcome to this week’s The Drill, which I will be authoring by myself moving forward. This means a continued focus on commodities and energy, but also an increased dosage of geopolitics as many of you have wished for.

Each week, we’ll cover a couple of key topics as well as provide you with a sneak peak into our data models and what they have to say on commodities.

OPEC+ sticks with production increases

OPEC+ has decided to stick with its plan to gradually increase oil production from April 2025 while removing the U.S. Energy Information Administration (EIA) from its list of secondary data sources. The group replaced EIA and Rystad Energy with Kpler, OilX, and ESAI, citing data-sharing issues rather than political motives.

President Donald Trump has urged OPEC+ to lower oil prices, arguing that high prices help fund Russia’s war in Ukraine. However, OPEC+ will proceed with its scheduled production increase of 138,000 barrels per day from April to September 2026, with a final decision expected next month

Oil prices rose towards $77 per barrel after Trump imposed tariffs on Mexico, Canada, and China, sparking supply concerns. However, prices quickly dropped again and still remain well below the $83 level seen in January.

Overall, this is obviously positive news for Trump and signals a willingness of OPEC+ to work with Trump – most likely sparked by Saudi Arabia, not Russia. OPEC+ have lost significant market share over past years and is facing a real dilemma for the OPEC+ countries.

My medium-term base case is still that oil needs to go even lower in an environment of decreasing geopolitical tensions and increases in production across the board. The big short-term joker is of course the tariffs, but that’s really anyone’s guess right now, to be honest.

We have alluded to a “tariff premium” being embedded in the USD for a while, but it may also be partially driven by the “tariff premium” in US fixed income overall.

In the absence of new developments, we would expect the USD to drift alongside USD bond yields, as this premium will eventually have to fade.

This is particularly evident in the oil versus bond yield spread, which is currently at its widest in a long time. If we finally reach a tariff detente, this spread is likely to contract significantly. To a large extent, a major tariff storm has already been priced in.

Chart 1.a: OPEC+ is increasingly irrelevant