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Item 7. Management’s Discussion and Analysis

2021-02-26 compared with 2020-03-13 · 438 added, 722 removed, 59 unchanged (95% of the section changed)

Management’s Discussion

and Analysis of Financial Condition and Results of Operations.

The following discussion should be read

in conjunction with the financial statements and the notes thereto of USL included elsewhere in this annual report on

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the financial statements and the notes thereto of United States 12 Month Oil Fund, LP (“USL”) included elsewhere in this annual report on Form 10-K.

Forward-Looking Information

This annual report on Form 10-K, including

this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking

statements regarding the plans and objectives of management for future operations.

This information may involve known and unknown

risks, uncertainties and other factors that may cause USL’s actual results, performance or achievements to be materially

different from future results, performance or achievements expressed or implied by any forward-looking statements.

Forward-looking

statements, which involve assumptions and describe USL’s future plans, strategies and expectations, are generally identifiable

by use of the words “may,” “will,” “should,” “expect,” “anticipate,”

“estimate,” “believe,” “intend” or “project,” the negative of these words, other

variations on these words or comparable terminology.

These forward-looking statements are based on assumptions that may be incorrect,

and USL cannot assure investors that the projections included in these forward-looking statements will come to pass.

actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various

USL has based the forward-looking

statements included in this annual report on Form 10-K on information available to it on the date of this annual report

on Form 10-K, and USL assumes no obligation to update any such forward-looking statements.

Although USL undertakes no

obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise,

investors are advised to consult any additional disclosures that USL may make directly to them or through reports that USL

files in the future with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on

USL, a Delaware limited partnership, is

a commodity pool that issues shares that may be purchased and sold on the NYSE Arca.

The investment objective of USL is for the

daily changes in percentage terms of its shares’ per share NAV to reflect the daily changes, in percentage terms, of the

spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the daily changes in the average of the prices

of 12 futures contracts for light, sweet crude oil traded on the NYMEX that is the near month contract to expire and the contracts

for the following 11 months for a total of 12 consecutive months’ contracts, except when the near month contract is within

two weeks of expiration, in which case it will be measured by the futures contract that is the next month contract to expire and

the contracts for the following 11 consecutive months, (the “Benchmark Oil Futures Contracts”), plus interest earned

on USL’s collateral holdings, less USL’s expenses.

“Near month contract” means the next contract traded

on the NYMEX due to expire.

“Next month contract” means the first contract traded on the NYMEX due to expire after

the near month contract.

When calculating the daily movement of the average price of the 12 contracts, each contract month is equally

USL’s investment objective is not

for its NAV or market price to equal, in dollar terms, the spot price of light, sweet crude oil or any particular futures contract

based on light, sweet crude oil, nor is USL’s investment objective for the percentage change in its NAV to reflect

the percentage change of the price of any particular futures contracts as measured over a time period greater than one day .

USCF believes that it is not practical to manage the portfolio to achieve such an investment goal when investing in Oil Futures

Contracts and Other Oil-Related Investments.

USL seeks to achieve its investment

objective by investing so that the average daily percentage change in USL’s NAV for any period of 30 successive valuation

days will be within plus/minus ten percent (10%) of the average daily percentage change in the price of the Benchmark Oil

Futures Contracts over the same period.

This annual report on Form 10-K, including this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding the plans and objectives of management for future operations.

This information may involve known and unknown risks, uncertainties and other factors that may cause USL’s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements.

USL believes these factors include, but are not limited to, the following:

changes in inflation in the United States;

movements in U.S.

and foreign currencies;

significant market volatility in the crude oil markets and futures markets attributable to the COVID-19 pandemic, disputes among oil-producing countries over the potential limits on the production of crude oil, a corresponding collapse in demand for crude oil and a lack of on-land storage for crude oil;

uncertainties associated with the impact from the coronavirus (COVID-19) pandemic, including:

its impact on the global and U.S.

capital markets and the global and U.S.

economy, the length and duration of the COVID-19 outbreak in the United States as well as worldwide and the magnitude of the economic impact of that outbreak, the effect of the COVID-19 pandemic on USL’s business prospects, including its ability to achieve its objectives, and the effect of the disruptions caused by the COVID-19 pandemic on our ability to continue to effectively manage our business.

Forward-looking statements, which involve assumptions and describe USL’s future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project,” the negative of these words, other variations on these words or comparable terminology.

These forward-looking statements are based on assumptions that may be incorrect, and USL cannot assure investors that the projections included in these forward-looking statements will come to pass.

USL’s actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors.

USL has based the forward-looking statements included in this annual report on Form 10-K on information available to it on the date of this annual report on Form 10-K, and USL assumes no obligation to update any such forward-looking statements.

Although USL undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, investors are advised to consult any additional disclosures that USL may make directly to them or through reports that USL files in the future with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

USL, a Delaware limited partnership, is a commodity pool that issues shares that may be purchased and sold on the NYSE Arca.

The investment objective of USL is for the daily changes in percentage terms of its shares’ per share NAV to reflect the daily changes, in percentage terms, of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the daily changes in the average of the prices of 12 futures contracts for light, sweet crude oil traded on the NYMEX that is the near month contract to expire and the contracts for the following 11 months for a total of 12 consecutive months’ contracts, except when the near month contract is within two weeks of expiration, in which case it will be measured by the futures contract that is the next month contract to expire and the contracts for the following 11 consecutive months, (the “Benchmark Oil Futures Contracts”), plus interest earned on USL’s collateral holdings, less USL’s expenses.

“Near month contract” means the next contract traded on the NYMEX due to expire.

“Next month contract” means the first contract traded on the NYMEX due to expire after the near month contract.

When calculating the daily movement of the average price of the 12 contracts, each contract month is equally weighted.

USL seeks to achieve its investment objective by investing so that the average daily percentage in USL's NAV for any period of 30 successive valuation days will be within plus/minus ten percent (10%) of the average daily percentage change in the price of the Benchmark Oil Futures Contracts over the same period.

USL’s investment objective is not for its NAV or market price of shares to equal, in dollar terms, the spot price of light, sweet crude oil or any particular futures contract based on light, sweet crude oil, nor is USL’s investment objective for the percentage change in its NAV to reflect the percentage change of the price of any particular futures contract as measured

over a time period greater than one day .

The general partner of USL, United States Commodity Funds LLC (“USCF”) believes that it is not practical to manage the portfolio to achieve such an investment goal when investing in Oil Futures Contracts (as defined below) and Other Oil-Related Investments (as defined below).

USL invests primarily in futures contracts for light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum-based fuels that are traded on the NYMEX, ICE Futures or other U.S.

and foreign exchanges (collectively, “Oil Futures Contracts”) and to a lesser extent, in order to comply with regulatory requirements or in view of market conditions, other oil-related investments such as cash-settled options on Oil Futures Contracts, forward contracts for oil, cleared swap contracts and OTC swaps that are based on the price of oil, other petroleum-based fuels, Oil Futures Contracts and indices based on the foregoing (collectively, “Other Oil-Related Investments”).

For convenience and unless otherwise specified, Oil Futures Contracts and Other Oil-Related Investments collectively are referred to as “Oil Interests” in this annual report on Form 10-K.

USCF believes that market arbitrage opportunities will cause daily changes in USL’s share price on the NYSE Arca on a percentage basis to closely track daily changes in USL’s per share NAV on a percentage basis.

USCF further believes that daily changes in prices of the Benchmark Oil Futures Contracts have historically closely tracked the daily changes in spot prices of light, sweet crude oil.

USCF believes that the net effect of these relationships will be that the daily changes in the price of USL’s shares on the NYSE Arca on a percentage basis will closely track, the daily changes in the spot price of a barrel of light, sweet crude oil on a percentage basis, plus interest earned on USL’s collateral holdings, less USL’s expenses.

USL seeks to achieve its investment objective by investing so that the average daily percentage change in USL’s NAV for any period of 30 successive valuation days will be within plus/minus ten percent (10%) of the average daily percentage change in the price of the Benchmark Oil Futures Contract over the same period.

Regulatory Disclosure

Accountability Levels, Position Limits and Price Fluctuation Limits.

Designated contract markets (“DCMs”), such as the NYMEX and ICE Futures, have established accountability levels and position limits on the maximum net long or net short futures contracts in commodity interests that any person or group of persons under common trading control (other than as a hedge, which an investment by USL is not) may hold, own or control.

These levels and position limits apply to the futures contracts that USL invests in to meet its investment objective.

In addition to accountability levels and position limits, the NYMEX and ICE Futures also set daily price fluctuation limits on futures contracts.

The daily price fluctuation limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day’s settlement price.

Once the daily price fluctuation limit has been reached in a particular futures contract, no trades may be made at a price beyond that limit.

The accountability levels for the Benchmark Oil Futures Contracts and other Oil Futures Contracts traded on U.S.-based futures exchanges, such as the NYMEX, are not a fixed ceiling, but rather a threshold above which the NYMEX may exercise greater scrutiny and control over an investor’s positions.

The current accountability level for investments for any one month in the Benchmark Oil Futures Contracts is 10,000 contracts.

In addition, the NYMEX imposes an accountability level for all months of 20,000 net futures contracts for light, sweet crude oil.

In addition, ICE Futures maintains accountability levels, position limits and monitoring authority for its futures contracts for light, sweet crude oil.

If USL and the Related Public Funds exceed these accountability levels for investments in the futures contracts for light, sweet crude oil, the NYMEX and ICE Futures will monitor such exposure and may ask for further information on their activities including the total size of all positions, investment and trading strategy, and the extent of liquidity resources of USL and the Related Public Funds.

If deemed necessary by the NYMEX and/or ICE Futures, USL could be ordered to reduce its net futures contracts back to the accountability level.

As of December 31, 2020, USL held 4,069 futures contracts for light, sweet crude oil traded on the NYMEX and did not hold any Oil Futures Contracts traded on the ICE Futures.

For the fiscal year ended December 31, 2020, USL did not exceed the accountability levels imposed by the NYMEX or ICE Futures, however, the aggregated total of certain of the Related Public Funds did exceed the accountability levels.

No action was taken by NYMEX and USL did not reduce the number of Oil Futures Contracts held as a result.

USCF received letters from the CME on behalf of the NYMEX Market Regulation Department on April 16, 2020 (the “April 16 CME Letter”) and on April 23, 2020 (the “April 23 CME Letter”, and together with the April 16 CME Letter, the “CME Letters”).

The CME Letters ordered USCF and the Related Public Funds not to exceed accountability levels in specified light, sweet crude oil futures contracts and not to assume any positions in the specified light, sweet crude oil futures contract in excess of the exchange established position limits.

The current accountability levels and position limits are set forth in the April 23 CME Letter which superseded the April 16 CME Letter.

The April 23 CME Letter ordered USCF, USL and the Related Public Funds not to exceed accountability levels in excess of 10,000 futures contracts in the light, sweet crude oil futures contract for June 2020.

Position limits differ from accountability levels in that they represent fixed limits on the maximum number of futures contracts that any person may hold and cannot allow such limits to be exceeded without express CFTC authority to do so.

In addition to accountability levels and position limits that may apply at any time, the NYMEX and ICE Futures impose position limits on contracts held in the last few days of trading in the near month contract to expire.

It is unlikely that USL will run up against such position limits because USL’s investment strategy is to close out its positions and “roll” from the near month contract to expire and the eleven following months to the next month contract to expire and the eleven following months during a one day each month.

The April 23 CME Letter, discussed above, ordered USCF, USL and the Related Public Funds not to assume a position in the light, sweet crude oil futures contract for June 2020 in excess of 15,000 long futures contracts, for July 2020 in 78,000 long futures contracts, for August 2020 in 50,000 long futures contracts, for September 2020 in 35,000 long futures contracts.

The foregoing accountability levels and position limits are subject to change.

For the fiscal year ended December 31, 2020, USL did not exceed any position limits imposed by the NYMEX and ICE Futures.

The regulation of commodity interest trading in the United States and other countries is an evolving area of the law.

statements made in this summary are subject to modification by legislative action and changes in the rules and regulations of the

SEC, FINRA, CFTC, the NFA, the futures exchanges, clearing organizations and other regulatory bodies.

Pending final resolution

of all applicable regulatory requirements, some examples of how new rules and regulations could impact USL are discussed in “Item

The various statements made in this summary are subject to modification by legislative action and changes in the rules and regulations of the SEC, FINRA, CFTC, the NFA, the futures exchanges, clearing organizations and other regulatory bodies.

Pending final resolution of all applicable regulatory requirements, some examples of how new rules and regulations could impact USL are discussed in “Item 1.

Business” and “Item 1A.

Risk Factors” in this annual report on Form 10-K.

Futures Contracts and Position Limits

The CFTC is generally prohibited by statute from regulating trading on non-U.S.

futures exchanges and markets.

The CFTC, however, has adopted regulations relating to the marketing of non-U.S.

futures contracts in the United States.

These regulations permit certain contracts on non-U.S.

exchanges to be offered and sold in the United States.

On October 15, 2020, the CFTC approved a Position Limits Rule.

The Position Limits Rule establishes federal position limits for 25 core referenced futures contracts (comprised of agricultural, energy and metals futures contracts), futures and options linked to the core referenced futures contracts, and swaps that are economically equivalent to the core referenced futures contracts.

The Position Limits Rule sets position limits for the spot month and non-spot month;

however, the non-spot month limits only apply in respect of the agricultural futures contracts that are currently subject to position limits under Part 150 of the CFTC regulations (the “legacy agricultural contracts”).

With respect to regulatory oversight, the Position Limits Rule delegates authority to designated contract markets and swap execution facilities to oversee certain aspects of the position limits framework.

In addition to setting the federal position limits, the Position Limits Rule also provides several exemptions from such position limits, including an expanded list of enumerated bona fide hedge exemptions and certain spread exemptions.

Further, the Position Limits Rule sets forth two alternative processes for pursuing an exemption for non-enumerated hedge positions.

Other than for the legacy agricultural contracts, compliance with the limits imposed by the Position Limits Rule will not be required until 2022, except that economically equivalent swaps need not comply with the Position Limits Rule until 2023.

The Benchmark Oil Futures Contract will be subject to position limits under the Position Limits Rule, and USL’s trading does not qualify as an enumerated bona fide hedge.

Accordingly, the Position Limits Rule could negatively impact the ability of USL to meet its investment objective by inhibiting USCF’s ability to effectively invest the proceeds from sales of Creation Baskets of USL in particular amounts and types of its permitted investments.

Until such time as compliance with the Position Limits Rule is required, the regulatory architecture in effect prior to the adoption of the Position Limit Rules will govern transactions in commodities and related derivatives.

Under that system, the CFTC enforces federal limits on speculation in the nine legacy agricultural contracts, while futures exchanges establish and enforce position limits and accountability levels for other agricultural products and certain energy products (e.g., oil and natural gas).

Under existing CFTC regulations and the Position Limits Rule, for the purpose of position limits, a market participant is generally required, subject to certain narrow exceptions, to aggregate all positions for which that participant controls the trading decisions with all positions for which that participant has a 10% or greater ownership interest in an account or position, as well as the positions of two or more persons acting pursuant to an express or implied agreement or understanding with that market participant (the "Aggregation Rules").

In October 2015, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the FDIC, the Farm Credit Administration, and the Federal Housing Finance Agency (each an “Agency” and, collectively, the “Agencies”) jointly adopted final rules to establish minimum margin and capital requirements for registered swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants (“Swap Entities”) that are subject to the jurisdiction of one of the Agencies (such entities, “Covered Swap Entities”, and the joint final rules, the “Final Margin Rules”).

The Final Margin Rules will subject non-cleared swaps and non-cleared security-based swaps between Covered Swap Entities and Swap Entities, and between Covered Swap Entities and financial end users that have material swaps exposure (i.e., an average daily aggregate notional of $8 billion or more in non-cleared swaps calculated in accordance with the Final Margin Rules), to a mandatory two-way minimum initial margin requirement.

The minimum amount of the initial margin required to be posted or collected would be either the amount calculated by the Covered Swap Entity using a standardized schedule set forth as an appendix to the Final Margin Rules, which provides the gross initial margin (as a percentage of total notional exposure) for certain asset classes, or an internal margin model of the Covered Swap Entity conforming to the requirements of the Final Margin Rules that is approved by the Agency having jurisdiction over the particular Covered Swap Entity.

The Final Margin Rules specify the types of collateral that may be posted or collected as initial margin for non-cleared swaps and non-cleared security-based swaps with financial end users (generally cash, certain government, government-sponsored enterprise securities, certain liquid debt, certain equity securities, certain eligible publicly traded debt, and gold);

and sets forth haircuts for certain collateral asset classes.

The Final Margin Rules require minimum variation margin to be exchanged daily for non-cleared swaps and non-cleared security-based swaps between Covered Swap Entities and Swap Entities and between Covered Swap Entities and all financial end-users (without regard to the swaps exposure of the particular financial end-user).

The minimum variation margin amount is the daily mark-to-market change in the value of the swap to the Covered Swap Entity, taking into account variation margin previously posted or collected.

For non-cleared swaps and security-based swaps between Covered Swap Entities and financial end-users, variation margin may be posted or collected in cash or non-cash collateral that is considered eligible for initial margin purposes.

Variation margin is not subject to segregation with an independent, third-party custodian, and may, if permitted by contract, be rehypothecated.

The initial margin requirements of the Final Margin Rules are being phased in over time, and the variation margin requirements of the Final Margin Rules are currently in effect.

USL is not a Covered Swap Entity under the Final Margin Rules, but it is a financial end-user.

Accordingly, USL is currently subject to the variation margin requirements of the Final Margin Rules.

However, USL does not have material swaps exposure and, accordingly, USL will not be subject to the initial margin requirements of the Final Margin Rules.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) required the CFTC and the SEC to adopt their own margin rules to apply to a limited number of registered swap dealers, security-based swap dealers, major swap participants, and major security-based swap participants that are not subject to the jurisdiction of one of the Agencies.

On December 16, 2015 the CFTC finalized its margin rules, which are substantially the same as the Final Margin Rules and have the same implementation timeline.

The SEC adopted margin rules for security-based swap dealers and

major security-based swap participants on June 21, 2019.

The SEC’s margin rules are generally aligned with the Final Margin Rules and the CFTC’s margin rules, but they differ in a few key respects relating to timing for compliance and the manner in which initial margin must be segregated.

USL does not currently engage in security-based swap transactions and, therefore, the SEC’s margin rules are not expected to apply to USL.

Mandatory Trading and Clearing of Swaps

CFTC regulations require that certain swap transactions be executed on organized exchanges or “swap execution facilities” and cleared through regulated clearing organizations (“derivative clearing organizations” (“DCOs”)), if the CFTC mandates the central clearing of a particular class of swap and such swap is “made available to trade” on a swap execution facility.

Currently, swap dealers, major swap participants, commodity pools, certain private funds and entities predominantly engaged in activities that are financial in nature are required to execute on a swap execution facility, and clear, certain interest rate swaps and index-based credit default swaps.

As a result, if USL enters into an interest rate or index-based credit default swap that is subject to these requirements, such swap will be required to be executed on a swap execution facility and centrally cleared.

Mandatory clearing and “made available to trade” determinations with respect to additional types of swaps are expected in the future, and, when finalized, could require USL to electronically execute and centrally clear certain OTC instruments presently entered into and settled on a bi-lateral basis.

If a swap is required to be cleared, initial and variation margin requirements are set by the relevant clearing organization, subject to certain regulatory requirements and guidelines.

Additional margin may be required and held by USL’s FCMs.

Other Requirements for Swaps

In addition to the margin requirements described above, swaps that are not required to be cleared and executed on a SEF but that are executed bilaterally are also subject to various requirements pursuant to CFTC regulations, including, among other things, reporting and recordkeeping requirements and, depending on the status of the counterparties, trading documentation requirements and dispute resolution requirements.

Derivatives Regulations in Non-U.S.

Jurisdictions

In addition to U.S.

laws and regulations, USL may be subject to non-U.S.

derivatives laws and regulations if it engages in futures and/or swap transactions with non-U.S.

For example, USL may be impacted by European laws and regulations to the extent that it engages in futures transactions on European exchanges or derivatives transactions with European entities.

Other jurisdictions impose requirements applicable to futures and derivatives that are similar to those imposed by the U.S., including position limits, margin, clearing and trade execution requirements.

Money Market Funds

The SEC adopted amendments to Rule 2a-7 under the Investment Company Act of 1940, as amended ("1940 Act"), which became effective in 2016, to reform money market funds (“MMFs”).

While the rule applies only to MMFs, it may indirectly affect institutional investors such as USL.

A portion of USL’s assets that are not used for margin or collateral in the Futures Contracts currently are invested in government MMFs.

USL does not hold any non-government MMFs and does not anticipate investing in any non-government MMFs.

However, if USL invests in other types of MMFs besides government MMFs in the future, USL could be negatively impacted by investing in an MMF that does not maintain a stable $1.00 NAV or that has the potential to impose redemption fees and gates (temporary suspension of redemptions).

Although such government money market funds seek to preserve the value of an investment at $1.00 per share, there is no guarantee that they will be able to do so and USL may lose money by investing in a government money market fund.

An investment in a government money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation, referred to herein as the FDIC, or any other government agency.

The share price of a government money market fund can fall below the $1.00 share price.

USL cannot rely on or expect a government money market fund’s adviser or its affiliates to enter into support agreements or take other actions to maintain the government money market fund’s $1.00 share price.

The credit quality of a government money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an adverse impact on the government money market fund’s share price.

Due to fluctuations in interest rates, the market value of securities held by a government money market fund may vary.

A government money

market fund’s share price can also be negatively affected during periods of high redemption pressures and/or illiquid markets.

Price Movements

Crude oil futures prices were volatile

during the year ended December 31, 2019.

The average price of the Benchmark Oil Futures Contracts started the year

at $47.210 per barrel.

The high of the year was on April 23, 2019 when the average price reached $64.69 per barrel.

low of the period was the starting price for the period, which was $47.21 per barrel.

The year ended with the average price

of the Benchmark Oil Futures Contracts at $58.60 per barrel, an increase of approximately 24.13% over the year.

per share NAV began the year at $17.82 and ended the year at $22.95 on December 31, 2019, an increase of approximately

28.79% over the year.

USL’s per share NAV reached its high for the year on April 23, 2019 at $24.36 and

its low for the period was at the beginning of the period when it was $17.82.

The average Benchmark Oil Futures Contracts

prices listed above began with the February 2019 to January 2020 contracts and ended with the February 2020 to January

2021 contracts.

The increase of approximately 24.13% on the average price of the Benchmark Oil Futures Contracts listed

above is a hypothetical return only and could not actually be achieved by an investor holding Oil Futures Contracts.

An investment

in Oil Futures Contracts would need to be rolled forward during the time period described in order to simulate such a result.

Furthermore, the change in the nominal price of these differing Oil Futures Contracts, measured from the start of the year

to the end of the year, does not represent the actual benchmark results that USL seeks to track, which are more fully described

below in the section titled “ Tracking USL's Benchmark .”

During the year ended December 31, 2019,

the crude oil futures market was in state of both contango and backwardation.

When the market is in a state of contango, the near

month crude Oil Futures Contract is lower than the price of the next month crude Oil Futures Contract, or contracts further away

from expiration.

During periods of backwardation, the near month crude Oil Futures Contract is higher than the price of the next

month crude Oil Futures Contract, or contracts further away from expiration.

For a discussion of the impact of backwardation and

contango on total returns, see “Term Structure of Crude Oil Prices and the Impact on Total Returns” below.

Valuation of Oil Futures Contracts and

the Computation of the Per Share NAV

The per share NAV of USL’s shares

is calculated once each NYSE Arca trading day.

Crude oil futures prices were volatile during the year ended December 31, 2020.

The average price of the Benchmark Oil Futures Contracts started the year at $58.60 per barrel.

The high of the year was on January 6, 2020 when the average price reached $60.66 per barrel.

The average low for the year was on April 21, 2020, which was $24.80 per barrel.

The year ended with the average price of the Benchmark Oil Futures Contracts at $48.27 per barrel, decrease of approximately (17.63)% over the year.

USL’s per share NAV began the year at $22.95 and ended the year at $17.23 on December 31, 2020, decrease of approximately (24.92)% over the year.

The average Benchmark Oil Futures Contracts prices listed above began with the February 2020 to January 2021 contracts and ended with the February 2021 to January 2022 contracts.

The decrease of approximately (17.63)% on the average price of the Benchmark Oil Futures Contracts listed above is a hypothetical return only and could not actually be achieved by an investor holding Oil Futures Contracts.

An investment in Oil Futures Contracts would need to be rolled forward during the time period described in order to simulate such a result.

Furthermore, the change in the nominal price of these differing Oil Futures Contracts, measured from the start of the year to the end of the year, does not represent the actual benchmark results that USL seeks to track, which are more fully described below in the section titled “ Tracking USL's Benchmark .”

During the year ended December 31, 2020, the crude oil futures market was in state of both contango and backwardation.

When the market is in a state of contango, the near month crude Oil Futures Contract is lower than the price of the next month crude Oil Futures Contract, or contracts further away from expiration.

During periods of backwardation, the near month crude Oil Futures Contract is higher than the price of the next month crude Oil Futures Contract, or contracts further away from expiration.

For a discussion of the impact of backwardation and contango on total returns, see “Term Structure of Crude Oil Prices and the Impact on Total Returns” below.

Valuation of Oil Futures Contracts and the Computation of the Per Share NAV

The per share NAV of USL’s shares is calculated once each NYSE Arca trading day.

The per share NAV for a particular trading day is released after 4:00 p.m.

New York time.

Trading during the core trading session on the NYSE Arca typically closes at 4:00 p.m.

New York time.

The Administrator uses

the NYMEX closing price (determined at the earlier of the close of the NYMEX or 2:30 p.m.

New York time) for the contracts held

on the NYMEX, but calculates or determines the value of all other USL investments, including ICE Futures contracts or other futures

contracts, as of the earlier of the close of the NYSE Arca or 4:00 p.m.

USL’s administrator uses the NYMEX closing price (determined at the earlier of the close of the NYMEX or 2:30 p.m.

New York time) for the contracts held on the NYMEX, but calculates or determines the value of all other USL investments, including ICE Futures contracts or other futures contracts, as of the earlier of the close of the NYSE Arca or 4:00 p.m.

New York time.

Results of Operations and the Crude

Results of Operations and the Crude Oil Market

Results of Operations.

6, 2007, USL listed its shares on the AMEX under the ticker symbol “USL.” On that day, USL established its initial

offering price at $50.00 per share and issued 300,000 shares to the initial Authorized Participant in exchange for $15,000,000

As a result of the acquisition of the AMEX by NYSE Euronext, USL’s shares ceased trading on the AMEX and commenced

trading on the NYSE Arca on November 25, 2008.

Since its initial offering of 11,000,000

shares, USL has registered one subsequent offering of its shares:

100,000,000 shares which were registered with the SEC on March

Shares offered by USL in the subsequent offerings were sold by it for cash at the shares’ per share NAV as described

in the applicable prospectus.

On December 6, 2007, USL listed its shares on the AMEX under the ticker symbol “USL.” On that day, USL established its initial offering price at $50.00 per share and issued 300,000 shares to the initial Authorized Participant in exchange for $15,000,000 in cash.

As a result of the acquisition of the AMEX by NYSE Euronext, USL’s shares ceased trading on the AMEX and commenced trading on the NYSE Arca on November 25, 2008.

As of December 31, 2020, USL had issued 52,050,000 shares, 11,400,000 of which were outstanding.

of December 31, 2019, there were 87,700,000 shares registered but not yet issued.

More shares may have been issued by USL

than are outstanding due to the redemption of shares.

Unlike funds that are registered under the 1940 Act, shares that have been

redeemed by USL cannot be resold by USL.

As a result, USL contemplates that additional offerings of its shares will be registered

with the SEC in the future in anticipation of additional issuances and redemptions.

As of December 31, 2019, USL had the following

Authorized Participants:

Citadel Securities LLC, Citigroup Global Markets Inc., Goldman Sachs & Company, JP Morgan Securities

Inc., Merrill Lynch Professional Clearing Corp., Morgan Stanley & Company, Inc., Nomura Securities International Inc., RBC

Capital Markets LLC, SG Americas Securities LLC, and Virtu Financial BD LLC.

For the Year Ended December 31, 2019

Compared to the Year Ended December 31, 2018;

and for the Year Ended December 31, 2018 Compared to the Year Ended December 31,

As of December 31, 2020, there were 258,950,000 shares registered but not yet issued.

USL has registered 311,000,000 shares since inception.

More shares may have been issued by USL than are outstanding due to the redemption of shares.

Unlike funds that are registered under the 1940 Act, shares that have been redeemed by USL cannot be resold by USL.

As a result, USL contemplates that additional offerings of its shares will be registered with the SEC in the future in anticipation of additional issuances and redemptions.

As of December 31, 2020, USL had the following Authorized Participants:

Citadel Securities LLC, Citigroup Global Markets Inc., Goldman Sachs & Company, JP Morgan Securities Inc., Merrill Lynch Professional Clearing Corp., Morgan Stanley & Company, Inc., Nomura Securities International Inc., RBC Capital Markets LLC, SG Americas Securities LLC, and Virtu Financial BD LLC.

For the Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019

Per share net asset value, end of year

Average daily total net assets

$ 107,723,119

Dividend and interest income earned on Treasuries, cash and/or cash equivalents

2 unchanged sentences

Total fees and other expenses excluding management fees

Fees and expenses related the registration or offering of additional shares

Total commissions accrued to brokers

5 unchanged sentences

Portfolio Expenses.

expenses consist of investment management fees, brokerage fees and commissions, certain offering costs, licensing fees, registration

fees, the fees and expenses of the independent directors of USCF and expenses relating to tax accounting and reporting requirements.

USL’s expenses consist of investment management fees, brokerage fees and commissions, certain offering costs, licensing fees, registration fees, the fees and expenses of the independent directors of USCF and expenses relating to tax accounting and reporting requirements.

The management fee that USL pays to USCF is calculated as a percentage of the total net assets of USL.

The fee is accrued

daily and paid monthly.

The increase in the per share NAV for the year ended December 31, 2019, compared to the year ended December 31, 2018, was due primarily

to higher prices for crude oil and the related increase in the value of the Oil Futures Contracts in which USL held and traded;

and the decrease in the per share NAV for the year ended December 31, 2018, compared to the year ended December 31, 2017, was due

primarily to lower prices for crude oil and the related decrease in the value of the Oil Futures Contracts in which USL held and

Average interest rates earned on short-term

investments held by USL, including cash, cash equivalents and Treasuries, were higher during the year ended December 31, 2019,

compared to the year ended December 31, 2018;

and were higher during the year ended December 31, 2018, compared to the year

ended December 31, 2017.

As a result, the amount of income earned by USL as a percentage of average daily total net assets

was higher during the year ended December 31, 2019, compared to the year ended December 31, 2018;

and was higher

during the year ended December 31, 2018 compared to the year ended December 31, 2017.

To the degree that the aggregate yield is

higher, the net expense ratio, inclusive of income, will be lower.

The decrease in total fees and other

expenses excluding management fees for the year ended December 31, 2019, compared to the year ended December 31,

2018 was due primarily to USL’s smaller size as measured by total net assets;

and the decrease in total fees and other

expenses excluding management fees for the year ended December 31, 2018, compared to the year ended December 31, 2017, was due

primarily to USL’s smaller size as measured by total net assets.

The increase in total commissions accrued

to brokers for the year ended December 31, 2019, compared to the year ended December 31, 2018, was due primarily to a

higher number of Oil Futures Contracts being held and traded;

and the decrease in total commissions accrued to brokers

for the year ended December 31, 2018, compared to the year ended December 31, 2017, was due primarily to lower number of Oil Futures

Contracts being held and traded.

For the Three Months Ended December

31, 2019 Compared to the Three Months Ended December 31, 2018;

and for the Three Months Ended December 31, 2018 Compared to the

Three Months Ended December 31, 2017

For the Three

Per share net asset value, end of period

Average daily total net assets

Dividend and interest income earned on Treasuries, cash and/or cash equivalents

Annualized yield based on average daily total net assets

Management fee

Total fees and other expenses excluding management fees

Total commissions accrued to brokers

Total commissions as annualized percentage of average total net assets

Commissions accrued as a result of rebalancing

Percentage of commissions accrued as a result of rebalancing

Commissions accrued as a result of creation and redemption activity

Percentage of commissions accrued as a result of creation and redemption activity

The increase in the per share NAV for the

three months ended December 31, 2019, compared to the three months ended December 31, 2018, was due primarily to higher prices

for crude oil and the related increase in the value of the Oil Futures Contracts in which USL held and traded;

and the decrease

in the per share NAV for the three months ended December 31, 2018, compared to the three months ended December 31, 2017, was due

primarily to lower prices for crude oil and the related decrease in the value of the Oil Futures Contracts in which USL held and

Average interest rates earned on short-term

investments held by USL, including cash, cash equivalents and Treasuries, were lower during the three months ended December 31,

2019, compared to the three months ended December 31, 2018;

and were higher during the three months ended December 31, 2018, compared

to the three months ended December 31, 2017.

As a result, the amount of income earned by USL as a percentage of average daily

total net assets was lower during the three months ended December 31, 2019, compared to the three months ended December 31,

and was higher during the three months ended December 31, 2018 compared to the three months ended December 31, 2017.

degree that the aggregate yield is lower, the net expense ratio, inclusive of income, will be higher.

The decrease in total fees and other

expenses excluding management fees for the three months ended December 31, 2019, compared to the three months ended December

31, 2018 was due primarily to USL’s smaller size as measured by total net assets;

and the decrease in total fees and

other expenses excluding management fees for the three months ended December 31, 2018, compared to the three months ended December

31, 2017, was due primarily to USL’s smaller size as measured by total net assets.

The increase in total commissions accrued

to brokers for the three months ended December 31, 2019, compared to the three months ended December 31, 2018, was due primarily

to a higher number of Oil Futures Contracts being held and traded;

and the decrease in total commissions accrued to brokers

for the three months ended December 31, 2018, compared to the three months ended December 31, 2017, was due primarily to lower

number of futures contracts being held and traded.

The fee is accrued daily and paid monthly.

The decrease in the per share NAV for the year ended December 31, 2020, compared to the year ended December 31, 2019, was due primarily to lower prices for crude oil and the related decrease in the value of the Oil Futures Contracts in which USL held and traded.

Average interest rates earned on short-term investments held by USL, including cash, cash equivalents and Treasuries, were lower during the year ended December 31, 2020, compared to the year ended December 31, 2019.

As a result, the amount of income earned by USL as a percentage of average daily total net assets was lower during the year ended December 31, 2020, compared to the year ended December 31, 2019.

To the degree that the aggregate yield is lower, the net expense ratio, inclusive of income, will be higher.

The increase in total fees and other expenses excluding management fees for the year ended December 31, 2020, compared to the year ended December 31, 2019 was due primarily to USL’s larger size as measured by total net assets.

The increase in total commissions accrued to brokers for the year ended December 31, 2020, compared to the year ended December 31, 2019, was due primarily to a higher number of Oil Futures Contracts being held and traded.

Tracking USL’s Benchmark

USCF seeks to manage USL's portfolio such

that changes in its average daily per share NAV, on a percentage basis, closely track the daily changes in the average of

the prices of the Benchmark Oil Futures Contracts, also on a percentage basis.

Specifically, USCF seeks to manage the portfolio

such that over any rolling period of 30-valuation days, the average daily change in USL's per share NAV is within a range

of 90% to 110% (0.9 to 1.1) of the average daily change in the prices of the Benchmark Oil Futures Contracts.

As an example,

if the average daily movement of the average of the prices of the Benchmark Oil Futures Contracts for a particular 30-valuation

day time period was 0.50% per day, USCF would attempt to manage the portfolio such that the average daily movement of the per share

NAV during that same time period fell between 0.45% and 0.55% (i.e., between 0.9 and 1.1 of the benchmark’s results).

portfolio management goals do not include trying to make the nominal price of USL's per share NAV equal to the average of

the nominal prices of the current Benchmark Oil Futures Contracts or the spot price for light, sweet crude oil.

USCF believes

that it is not practical to manage the portfolio to achieve such an investment goal when investing in Oil Futures Contracts

and Other Oil-Related Investments.

For the 30-valuation days ended December

31, 2019, the simple average daily change in the Benchmark Oil Futures Contracts was 0.188%, while the simple average daily

change in the per share NAV of USL over the same time period was 0.192%.

The average daily difference was 0.004% (or 0.4

basis points, where 1 basis point equals 1/100 of 1%).

As a percentage of the daily movement of the Benchmark Oil Futures Contracts,

the average error in daily tracking by the per share NAV was 2.593%, meaning that over this time period USL’s tracking error was

within the plus or minus 10% range established as its benchmark tracking goal.

A significant portion of the level of USL's relative

tracking error as a percentage of the benchmark was due to periods of flat price returns.

The first chart below shows the

daily movement of USL’s per share NAV versus the daily movement of the Benchmark Oil Futures Contracts for the 30-valuation

day period ended December 31, 2019, the last trading day in December.

The second chart below shows the monthly total returns of

USL as compared to the monthly value of the Benchmark Oil Futures Contracts for the five years ended December 31, 2019.

Since the commencement of the offering

of USL’s shares to the public on December 6, 2007 to December 31, 2019, the simple average daily change in the Benchmark

Oil Futures Contracts was (0.005)%, while the simple average daily change in the per share NAV of USL over the same time period

was (0.006)%.

The average daily difference was (0.001)% (or (0.1) basis points, where 1 basis point equals 1/100 of 1%).

a percentage of the daily movement of the Benchmark Oil Futures Contracts, the average error in daily tracking by the per share

NAV was (0.495)%, meaning that over this time period USL’s tracking error was within the plus or minus 10% range established

as its benchmark tracking goal.

*PAST PERFORMANCE IS NOT NECESSARILY

INDICATIVE OF FUTURE RESULTS

*PAST PERFORMANCE IS NOT NECESSARILY

INDICATIVE OF FUTURE RESULTS

An alternative tracking measurement of

the return performance of USL versus the return of its Benchmark Oil Futures Contracts can be calculated by comparing

the actual average of the prices of its return of USL, measured by changes in its per share NAV, versus the expected changes in

its per share NAV under the assumption that USL’s returns had been exactly the same as the daily changes in the average of

the prices of its Benchmark Oil Futures Contracts.

For the year ended December 31, 2019,

the actual total return of USL as measured by changes in its per share NAV was 28.79%.

This is based on an initial per share

NAV of $17.82 as of December 31, 2018 and an ending per share NAV as of December 31, 2019 of $22.95.

During this time

period, USL made no distributions to its shareholders.

However, if USL’s daily changes in its per share NAV had instead

exactly tracked the changes in the daily total return of the Benchmark Oil Futures Contracts, USL would have had an estimated

per share NAV of $22.65 as of December 31, 2019, for a total return over the relevant time period of 27.10%.

The difference between

the actual per share NAV total return of USL of 28.79% and the expected total return based on the Benchmark Oil Futures Contracts

of 27.10% was an error over the time period of 1.69%, which is to say that USL’s actual total return outperformed its benchmark by

that percentage.

USL incurs expenses primarily composed of the management fee, brokerage commissions for the buying and selling

of futures contracts, and other expenses.

The impact of these expenses, offset by interest and dividend income, and net of positive

or negative execution, tends to cause daily changes in the per share NAV of USL to track slightly lower or higher than

daily changes in the price of the Benchmark Oil Futures Contracts.

By comparison, for the year ended

December 31, 2018, the actual total return of USL as measured by changes in its per share NAV was (15.34)%.

This was based

on an initial per share NAV of $21.05 as of December 31, 2017 and an ending per share NAV as of December 31, 2018 of

USCF seeks to manage USL’s portfolio such that changes in its average daily per share NAV, on a percentage basis, closely track the daily changes in the average of the prices of the Benchmark Oil Futures Contracts, also on a percentage basis.

Specifically, USCF seeks to manage the portfolio such that over any rolling period of 30-valuation days, the average daily change in USL’s per share NAV is within a range of 90% to 110% (0.9 to 1.1) of the average daily change in the prices of the Benchmark Oil Futures Contracts.

As an example, if the average daily movement of the average of the prices of the Benchmark Oil Futures Contracts for a particular 30-valuation day time period was 0.50% per day, USCF would attempt to manage the portfolio such that the average daily movement of the per share NAV during that same time period fell between 0.45% and 0.55% (i.e., between 0.9 and 1.1 of the benchmark’s results).

USL’s portfolio management goals do not include trying to make the nominal price of USL’s per share NAV equal to the average of the nominal prices of the current Benchmark Oil Futures Contracts or the spot price for light, sweet crude oil.

USCF believes that it is not practical to manage the portfolio to achieve such an investment goal when investing in Oil Futures Contracts and Other Oil-Related Investments.

For the 30-valuation days ended December 31, 2020, the average daily change in the Benchmark Oil Futures Contracts was 0.429%, while the average daily change in the per share NAV of USL over the same time period was 0.420%.

The average daily difference was (0.009)% (or (0.9) basis points, where 1 basis point equals 1/100 of 1)%, meaning that over this time period USL’s NAV performed within the plus or minus 10% range established as its benchmark tracking goal.

The average daily difference expressed as a percentage of average daily change in the Benchmark Oil Futures Contracts for the same period was (2.078)%.

This ratio expressed in percentage terms is significantly affected by days or periods with flat price returns, and therefore, is not a meaningful measure of how well USL tracks its benchmark.

Since the commencement of the offering of USL’s shares to the public on December 6, 2007 to December 31, 2020, the average daily change in the Benchmark Oil Futures Contracts was (0.009)%, while the average daily change in the per share NAV of USL over the same time period was (0.010)%.

The average daily difference was (0.001)% (or (0.1) basis points, where 1 basis point equals 1/100 of 1)%, meaning that over this time period USL’s NAV performed within the plus or minus 10% range established as its benchmark tracking goal.

The average daily difference expressed as a percentage of the average daily change in Benchmark Oil Futures Contract for the same period was (0.655)%.

This ratio expressed in percentage terms is significantly affected by days or periods with flat price returns, and therefore, is not a meaningful measure of how well USL tracks its benchmark.

The following two graphs demonstrate the correlation between the changes in USL’s NAV and the changes in the Benchmark Oil Futures Contracts.

The first graph exhibits the daily changes in the last 30 valuation days ended December 31, 2020.

The second graph measures monthly changes since December 31, 2015 through December 31, 2020.

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

An alternative tracking measurement of the return performance of USL versus the return of its Benchmark Oil Futures Contracts can be calculated by comparing the actual average of the prices of its return of USL, measured by changes in its per share NAV, versus the expected changes in its per share NAV under the assumption that USL’s returns had been exactly the same as the daily changes in the average of the prices of its Benchmark Oil Futures Contracts.

For the year ended December 31, 2020, the actual total return of USL as measured by changes in its per share NAV was (24.92)%.

This is based on an initial per share NAV of $22.95 as of December 31, 2019 and an ending per share NAV as of December 31, 2020 of $17.23.

During this time period, USL made no distributions to its shareholders.

However, if USL’s daily changes in its

per share NAV had instead exactly tracked the changes in the daily total return of the Benchmark Oil Futures Contracts, USL

would have had an estimated per share NAV of $17.64 as of December 31, 2018, for a total return over the relevant time period of

The difference between the actual per share NAV total return of USL of (15.34)% and the expected total return based on

the Benchmark Oil Futures Contracts of (16.20)% was an error over the time period of 0.86%, which is to say that USL’s actual

total return outperformed its benchmark by that percentage.

USL incurred expenses primarily composed of the management fee,

brokerage commissions for the buying and selling of futures contracts, and other expenses.

The impact of these expenses, offset

by interest and dividend income, and net of positive or negative execution, tended to cause daily changes in the per share NAV

of USL to track slightly lower or higher than daily changes in the price of the Benchmark Oil Futures Contracts.

By comparison, for the year ended December

31, 2017, the actual total return of USL as measured by changes in its per share NAV was 3.24%.

This was based on an initial per

share NAV of $20.39 on December 31, 2016 and an ending per share NAV as of December 31, 2017 of $21.05.

During this time period,

USL made no distributions to its shareholders.

However, if USL’s daily changes in its per share NAV had instead exactly tracked

the changes in the daily total return of the Benchmark Oil Futures Contracts, USL would have had an estimated per share NAV of

$21.06 as of December 31, 2017, for a total return over the relevant time period of 3.29%.

The difference between the actual per

share NAV total return of USL of 3.24% and the expected total return based on the Benchmark Oil Futures Contracts of 3.29% was

an error over the time period of (0.05)%, which is to say that USL's actual total return underperformed the benchmark result by

that percentage.

USL incurs expenses primarily composed of the management fee, brokerage commissions for the buying and selling

of futures contracts, and other expenses.

The impact of these expenses, offset by interest and dividend income, and net of positive

or negative execution, tended to cause daily changes in the per share NAV of USL to track slightly lower than daily changes in

the price of the Benchmark Oil Futures Contracts.

There are currently three factors

that have impacted or are most likely to impact USL's ability to accurately track its Benchmark Oil Futures Contracts.

First, USL may buy or sell its

holdings in the then current Benchmark Oil Futures Contracts at a price other than the closing settlement price of that contract

on the day during which USL executes the trade.

In that case, USL may pay a price that is higher, or lower, than that

of the Benchmark Oil Futures Contracts, which could cause the changes in the daily per share NAV of USL to either be too high

or too low relative to the daily changes in the average price of the Benchmark Oil Futures Contracts.

During the year ended

December 31, 2019, USCF attempted to minimize the effect of these transactions by seeking to execute its purchase or sale of the Benchmark

Oil Futures Contracts at, or as close as possible to, the end of the day settlement price.

However, it may not always be possible

for USL to obtain the closing settlement price and there is no assurance that failure to obtain the closing settlement price

in the future will not adversely impact USL's attempt to track the Benchmark Oil Futures Contracts.

Second, USL incurs expenses primarily

composed of the management fee, brokerage commissions for the buying and selling of futures contracts, and other expenses.

impact of these expenses tends to cause daily changes in the per share NAV of USL to track slightly lower than daily changes

in the price of the Benchmark Oil Futures Contracts.

At the same time, USL earns dividend and interest income on its cash,

cash equivalents and Treasuries.

USL is not required to distribute any portion of its income to its shareholders and did not

make any distributions to shareholders during the year ended December 31, 2019.

Interest payments, and any other income, were

retained within the portfolio and added to USL's NAV.

When this income exceeds the level of USL's expenses for its management

fee, brokerage commissions and other expenses (including ongoing registration fees, licensing fees and the fees and expenses of

the independent directors of USCF), USL will realize a net yield that will tend to cause daily changes in the per share NAV

of USL to track slightly higher than daily changes in the average of the prices of the Benchmark Oil Futures Contracts.

short-term interest rates rise above the current levels, the level of deviation created by the yield would increase.

if short-term interest rates were to decline, the amount of error created by the yield would decrease.

When short-term yields drop

to a level lower than the combined expenses of the management fee and the brokerage commissions, then the tracking error becomes

a negative number and would tend to cause the daily returns of the per share NAV to underperform the daily returns of the Benchmark

Oil Futures Contracts.

USCF anticipates that interest rates may continue to stagnate over the near future from historical

However, it is anticipated that fees and expenses paid by USL may continue to be lower than interest earned by

As such, USCF anticipates that USL could possibly outperform its benchmark so long as interest earned at least

equals or exceeds the fees and expenses paid by USL.

Third, USL may hold Other Oil-Related

Investments in its portfolio that may fail to closely track the Benchmark Oil Futures Contracts' total return movements.

that case, the error in tracking the Benchmark Oil Futures Contracts could result in daily changes in the per share NAV of USL

that are either too high, or too low, relative to the daily changes in the average price of the Benchmark Oil Futures Contracts.

However, if USL’s daily changes in its per share NAV had instead exactly tracked the changes in the daily total return of the Benchmark Oil Futures Contracts, USL would have had an estimated per share NAV of $17.31 as of December 31, 2020, for a total return over the relevant time period of (24.58)%.

The difference between the actual per share NAV total return of USL of (24.92)% and the expected total return based on the Benchmark Oil Futures Contracts of (24.58)% was an error over the time period of (0.34)% which is to say that USL’s actual total return underperformed its benchmark by that percentage.

USL incurs expenses primarily composed of the management fee, brokerage commissions for the buying and selling of futures contracts, and other expenses.

The impact of these expenses, offset by interest and dividend income, and net of positive or negative execution, tends to cause daily changes in the per share NAV of USL to track slightly lower than daily changes in the price of the Benchmark Oil Futures Contracts.

By comparison, for the year ended December 31, 2019, the actual total return of USL as measured by changes in its per share NAV was 28.79%.

This is based on an initial per share NAV of $17.82 as of December 31, 2018 and an ending per share NAV as of December 31, 2019 of $22.95.

During this time period, USL made no distributions to its shareholders.

However, if USL’s daily changes in its per share NAV had instead exactly tracked the changes in the daily total return of the Benchmark Oil Futures Contracts, USL would have had an estimated per share NAV of $22.65 as of December 31, 2019, for a total return over the relevant time period of 27.10%.

The difference between the actual per share NAV total return of USL of 28.79% and the expected total return based on the Benchmark Oil Futures Contracts of 27.10% was an error over the time period of 1.69%, which is to say that USL’s actual total return outperformed its benchmark by that percentage.

USL incurs expenses primarily composed of the management fee, brokerage commissions for the buying and selling of futures contracts, and other expenses.

The impact of these expenses, offset by interest and dividend income,

and net of positive or negative execution, tends to cause daily changes in the per share NAV of USL to track slightly lower than daily changes in the price of the Benchmark Oil Futures Contracts.

There are currently three factors that have impacted or are most likely to impact USL’s ability to accurately track its Benchmark Oil Futures Contracts.

First, USL may buy or sell its holdings in the then current Benchmark Oil Futures Contracts at a price other than the closing settlement price of that contract on the day during which USL executes the trade.

In that case, USL may pay a price that is higher, or lower, than that of the Benchmark Oil Futures Contracts, which could cause the changes in the daily per share NAV of USL to either be too high or too low relative to the daily changes in the average price of the Benchmark Oil Futures Contracts.

During the year ended December 31, 2020, USCF attempted to minimize the effect of these transactions by seeking to execute its purchase or sale of the Benchmark Oil Futures Contracts at, or as close as possible to, the end of the day settlement price.

However, it may not always be possible for USL to obtain the closing settlement price and there is no assurance that failure to obtain the closing settlement price in the future will not adversely impact USL’s attempt to track the Benchmark Oil Futures Contracts.

Second, USL incurs expenses primarily composed of the management fee, brokerage commissions for the buying and selling of futures contracts, and other expenses.

The impact of these expenses tends to cause daily changes in the per share NAV of USL to track slightly lower than daily changes in the price of the Benchmark Oil Futures Contracts.

At the same time, USL earns dividend and interest income on its cash, cash equivalents and Treasuries.

USL is not required to distribute any portion of its income to its shareholders and did not make any distributions to shareholders during the year ended December 31, 2020.

Interest payments, and any other income, were retained within the portfolio and added to USL’s NAV.

When this income exceeds the level of USL’s expenses for its management fee, brokerage commissions and other expenses (including ongoing registration fees, licensing fees and the fees and expenses of the independent directors of USCF), USL will realize a net yield that will tend to cause daily changes in the per share NAV of USL to track slightly higher than daily changes in the average of the prices of the Benchmark Oil Futures Contracts.

If short-term interest rates rise above these current levels, the level of deviation created by the yield would increase.

Conversely, if short-term interest rates were to decline, the amount of error created by the yield would decrease.

When short-term yields drop to a level lower than the combined expenses of the management fee and the brokerage commissions, then the tracking error becomes a negative number and would tend to cause the daily returns of the per share NAV to underperform the daily returns of the Benchmark Oil Futures Contracts.

USCF anticipates that interest rates may continue to stagnate over the near future near historical lows.

It is anticipated that fees and expenses paid by USL may continue to be higher than interest earned by USL.

As such, USCF anticipates that USL could possibly underperform its benchmark so long as interest earned is less than fees and expenses paid by USL.

Third, USL may hold Other Oil-Related Investments in its portfolio that may fail to closely track the Benchmark Oil Futures Contracts’ total return movements.

In that case, the error in tracking the Benchmark Oil Futures Contracts could result in daily changes in the per share NAV of USL that are either too high, or too low, relative to the daily changes in the average price of the Benchmark Oil Futures Contracts.

During the year ended December 31, 2020, USL did not hold any Other Oil-Related Investments.

If USL increases in

size, and due to its obligations to comply with regulatory limits, USL may invest in Other Oil-Related Investments which may have

the effect of increasing transaction related expenses and may result in increased tracking error.

Term Structure of Crude Oil Futures

Prices and the Impact on Total Returns.

Several factors determine the total return from investing in futures contracts.

factor arises from “rolling” futures contracts that will expire at the end of the current month (the “near”

or “front” month contract) forward each month prior to expiration.

For a strategy that entails holding the near month

contract, the price relationship between that futures contract and the next month futures contract will impact returns.

if the price of the near month futures contract is higher than the next futures month contract (a situation referred to as “backwardation”),

then absent any other change, the price of a next month futures contract tends to rise in value as it becomes the near month futures

contract and approaches expiration.

Conversely, if the price of a near month futures contract is lower than the next month futures

contract (a situation referred to as “contango”), then absent any other change, the price of a next month futures contract

tends to decline in value as it becomes the near month futures contract and approaches expiration.

As an example, assume that the price of crude

oil for immediate delivery, is $50 per barrel, and the value of a position in the near month futures contract is also $50.

time, the price of crude oil will fluctuate based on a number of market factors, including demand for oil relative to

If USL increases in size, and due to its obligations to comply with regulatory limits, USL may invest in Other Oil-Related Investments which may have the effect of increasing transaction related expenses and may result in increased tracking error.

Term Structure of Crude Oil Futures Prices and the Impact on Total Returns.

S everal factors determine the total return from investing in futures contracts.

One factor arises from “rolling” futures contracts that will expire at the end of the current month (the “near” or “front” month contract) forward each month prior to expiration.

For a strategy that entails holding the near month contract, the price relationship between that futures contract and the next month futures contract will impact returns.

For example, if the price of the near month futures contract is higher than the next futures month contract (a situation referred to as “backwardation”), then absent any other change, the price of a next month futures contract tends to rise in value as it becomes the near month futures contract and approaches expiration.

Conversely, if the price of a near month futures contract is lower than the next month futures contract (a situation referred to as “contango”), then absent any other change, the price of a next month futures contract tends to decline in value as it becomes the near month futures contract and approaches expiration.

As an example, assume that the price of crude oil for immediate delivery, is $50 per barrel, and the value of a position in the near month futures contract is also $50.

Over time, the price of crude oil will fluctuate based on a number of market factors, including demand for oil relative to supply.

The value of the near month futures contract will likewise fluctuate in reaction to a number of market factors.

If an investor

seeks to maintain a position in a near month futures contract and not take delivery of physical barrels of crude oil, the

investor must sell the current near month futures contract as it approaches expiration and invest in the next month futures contract.

In order to continue holding a position in the current near month futures contract, this “roll” forward of the futures

contract must be executed every month.

Contango and backwardation are natural

market forces that have impacted the total return on an investment in USL’s shares during the past year relative to a hypothetical

direct investment in crude oil.

In the future, it is likely that the relationship between the market price of USL’s shares

and changes in the spot prices of light, sweet crude oil will continue to be impacted by contango and backwardation.

important to note that this comparison ignores the potential costs associated with physically owning and storing crude oil, which

could be substantial.

If the futures market is in backwardation,

e.g., when the price of the near month futures contract is higher than the price of the next month futures contract, the investor

would buy a next month futures contract for a lower price than the current near month futures contract.

Assuming the price of the

next month futures contract was $49 per barrel, or 2% cheaper than the $50 near month futures contract, then, hypothetically, and

assuming no other changes (e.g., to either prevailing crude oil prices or the price relationship between the spot price, the

near month contract and the next month contract, and, ignoring the impact of commission costs and the income earned on cash and/or

cash equivalents), the value of the $49 next month futures contract would rise to $50 as it approaches expiration.

In this example,

the value of an investment in the next month futures contract would tend to outperform the spot price of crude oil.

it would be possible for the new near month futures contract to rise 12% while the spot price of crude oil may have risen

a lower amount, e.g., only 10%.

Similarly, the spot price of crude oil could have fallen 10% while the value of an investment

in the futures contract might have fallen another amount, e.g., only 8%.

Over time, if backwardation remained constant, this difference

between the spot price and the futures contract price would continue to increase.

If the futures market is in contango, an

investor would be buying a next month futures contract for a higher price than the current near month futures contract.

Again, assuming the near month futures contract is $50 per barrel, the price of the next month futures contract might be $51

per barrel, or 2% more expensive than the front month futures contract.

Hypothetically, and assuming no other changes, the value

of the $51 next month futures contract would fall to $50 as it approaches expiration.

In this example, the value of an investment

in the second month would tend to underperform the spot price of crude oil.

As a result, it would be possible for the new near

month futures contract to rise only 10% while the spot price of crude oil may have risen a higher amount, e.g., 12%.

the spot price of crude oil could have fallen 10% while the value of an investment in the second month futures contract might

have fallen another amount, e.g., 12%.

Over time, if contango remained constant, this difference between the spot price and the

futures contract price would continue to increase.

The chart below compares the daily price of the near month crude

oil futures contract to the price of 13 th month crude oil futures contract (i.e., a contract one year forward)

over the last 10 years.

When the price of the near month futures contract is higher than the price of the 13 th month

futures contract, the market would be described as being in backwardation.

When the price of the near month futures contract is

lower than the 13 th month futures contract, the market would be described as being in contango.

Although the price

of the near month futures contract and the price of the 13 th month futures contract tend to move together, it

can be seen that at times the near month futures contract prices are higher than the 13 th month futures contract

prices (backwardation) and, at other times, the near month futures contract prices are lower than the 13 th month futures

contract prices (contango).

*PAST PERFORMANCE IS NOT NECESSARILY

INDICATIVE OF FUTURE RESULTS

An alternative way to view the same data

is to subtract the dollar price of the 13 th month crude oil futures contract from the dollar price of the near

month crude oil futures contract, as shown in the chart below.

If an investor seeks to maintain a position in a near month futures contract and not take delivery of physical barrels of crude oil, the investor must sell the current near month futures contract as it approaches expiration and invest in the next month futures contract.

In order to continue holding a position in the current near month futures contract, this “roll” forward of the futures contract must be executed every month.

Contango and backwardation are natural market forces that have impacted the total return on an investment in USL’s shares during the past year relative to a hypothetical direct investment in crude oil.

In the future, it is likely that the relationship between the market price of USL’s shares and changes in the spot prices of light, sweet crude oil will continue to be impacted by contango and backwardation.

It is important to note that this comparison ignores the potential costs associated with physically owning and storing crude oil, which could be substantial.

If the futures market is in backwardation, e.g., when the price of the near month futures contract is higher than the price of the next month futures contract, the investor would buy a next month futures contract for a lower price than the current near month futures contract.

Assuming the price of the next month futures contract was $49 per barrel, or 2% cheaper than the $50 near month futures contract, then, hypothetically, and assuming no other changes (e.g., to either prevailing crude oil prices or the price relationship between the spot price, the near month contract and the next month contract, and, ignoring the impact of commission costs and the income earned on cash and/or cash equivalents), the value of the $49 next month futures contract would rise to $50 as it approaches expiration.

In this example, the value of an investment in the next month futures contract would tend to outperform the spot price of crude oil.

As a result, it would be possible for the new near month futures contract to rise 12% while the spot price of crude oil may have risen a lower amount, e.g., only 10%.

Similarly, the spot price of crude oil could have fallen 10% while the value of an investment in the futures contract might have fallen another amount, e.g., only 8%.

Over time, if backwardation remained constant, this difference between the spot price and the futures contract price would continue to increase.

If the futures market is in contango, an investor would be buying a next month futures contract for a higher price than the current near month futures contract.

Again, assuming the near month futures contract is $50 per barrel, the price of the next month futures contract might be $51 per barrel, or 2% more expensive than the front month futures contract.

Hypothetically, and assuming no other changes, the value of the $51 next month futures contract would fall to $50 as it approaches expiration.

In this example, the value of an investment in the second month would tend to underperform the spot price of crude oil.

As a result, it would be possible for the new near month futures contract to rise only 10% while the spot price of crude oil may have risen a higher amount, e.g., 12%.

Similarly, the spot price of crude oil could have fallen 10% while the value of an investment in the second month futures contract might have fallen another amount, e.g., 12%.

Over time, if contango remained constant, this difference between the spot price and the futures contract price would continue to increase.

The chart below compares the daily price of the near month crude oil futures contract to the price of 13 th month crude oil futures contract (i.e., a contract one year forward) over the last 10 years.

When the price of the near month futures contract is higher than the price of the 13 th month futures contract, the market would be described as being in backwardation.

When the price of the near month futures contract is lower than the 13 th month futures contract, the market would be described as being in contango.

Although the price of the near month futures contract and the price of the 13 th month futures contract tend to move together, it can be seen that at times the near month futures contract prices are higher than the 13 th month futures contract prices (backwardation) and, at other times, the near month futures contract prices are lower than the 13 th month futures contract prices (contango).

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

An alternative way to view the same data is to subtract the dollar price of the 13 th month crude oil futures contract from the dollar price of the near month crude oil futures contract, as shown in the chart below.

When the difference is positive, the market is in backwardation.

When the difference is negative, the market is in contango.

The crude oil market spent time in both backwardation and contango

during the last ten years.

*PAST PERFORMANCE IS NOT NECESSARILY

INDICATIVE OF FUTURE RESULTS

An investment in a portfolio that owned

only the near month crude oil futures contract would likely produce a different result than an investment in a portfolio that owned

an equal number of each of the near 12 months’ of crude oil futures contracts.

Generally speaking, when the crude oil futures

market is in backwardation, a portfolio of only the near month crude oil futures contract may tend to have a higher total return

than a portfolio of 12 months’ of the crude oil futures contract.

Conversely, if the crude oil futures market was in contango,

the portfolio containing only 12 months’ of crude oil futures contracts may tend to outperform the portfolio holding only

the near month crude oil futures contract.

Historically, the crude oil futures markets

have experienced periods of contango and backwardation, with backwardation being in place somewhat less often than contango since

oil futures trading started in 1983.

Following the global financial crisis in the fourth quarter of 2008, the crude oil market

moved into contango and remained in contango for a period of several years.

During parts of 2009, the level of contango was unusually

steep as a combination of slack U.S.

and global demand for crude oil and issues involving the physical transportation and storage

of crude oil at Cushing, Oklahoma, the primary pricing point for oil traded in the U.S., led to unusually high inventories of crude

A combination of improved transportation and storage capacity, along with growing demand for crude oil globally, moderated

the inventory build-up and led to reduced levels of contango by 2011.

However, at the end of November 2014, global crude oil inventories

grew rapidly after the Organization of Petroleum Exporting Countries (“OPEC”) voted to defend its market share against

The crude oil market spent time in both backwardation and contango during the last ten years.

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

An investment in a portfolio that owned only the near month crude oil futures contract would likely produce a different result than an investment in a portfolio that owned an equal number of each of the near 12 months’ of crude oil futures contracts.

Generally speaking, when the crude oil futures market is in backwardation, a portfolio of only the near month crude oil futures contract may tend to have a higher total return than a portfolio of 12 months’ of the crude oil futures contract.

Conversely, if the crude oil futures market was in contango, the portfolio containing only 12 months’ of crude oil futures contracts may tend to outperform the portfolio holding only the near month crude oil futures contract.

Historically, the crude oil futures markets have experienced periods of contango and backwardation, with backwardation being in place somewhat less often than contango since oil futures trading started in 1983.

Following the global financial crisis in the fourth quarter of 2008, the crude oil market moved into contango and remained in contango for a period of several years.

During parts of 2009, the level of contango was unusually steep as a combination of slack U.S.

and global demand for crude oil and issues involving the physical transportation and storage of crude oil at Cushing, Oklahoma, the

primary pricing point for oil traded in the U.S., led to unusually high inventories of crude oil.

A combination of improved transportation and storage capacity, along with growing demand for crude oil globally, moderated the inventory build-up and led to reduced levels of contango by 2011.

However, at the end of November 2014, global crude oil inventories grew rapidly after the Organization of Petroleum Exporting Countries (“OPEC”) voted to defend its market share against U.S.

shale-oil producers, resulting in another period during which the crude oil market remained primarily in contango.

of contango continued through December 31, 2017.

Declining global crude oil inventories caused the market to flip into backwardation

at the beginning of 2018 through late October 2018, at which point ongoing supply growth in the U.S., combined with increased OPEC

production, once again led market participants to fear another global glut of crude oil.

The crude oil market was primarily in

contango the first half of 2019 and in backwardation from August through December 31, 2019.

USCF believes that holding futures contracts

whose expiration dates are spread out over a 12 month period of time will cause the total return of such a portfolio to vary compared

to a portfolio that holds only a single month’s contract (such as the near month contract).

In particular, USCF believes

that the total return of a portfolio holding contracts with a range of expiration months will be impacted differently by the price

relationship between different contract months of the same commodity future compared to the total return of a portfolio consisting

of the near month contract.

USCF believes that based on historical evidence a portfolio that held futures contracts with a range

of expiration dates spread out over a 12 month period of time would typically be impacted less by the positive effect of backwardation,

and less by the negative effect of contango, compared to a portfolio that held contracts of a single near month.

As a result, absent

the impact of any other factors, a portfolio of 12 different monthly contracts would tend to have a lower total return than a near

month only portfolio in a backwardation market and a higher total return in a contango market.

However, there can be no assurance

that such historical relationships would provide the same or similar results in the future.

Periods of contango or backwardation do

not materially impact USL’s investment objective of having the daily percentage changes in its per share NAV track the daily

percentage changes in the price of the Benchmark Oil Futures Contracts since the impact of backwardation and contango tend to equally

impact the daily percentage changes in price of both USL’s shares and the Benchmark Oil Futures Contracts.

It is impossible

to predict with any degree of certainty whether backwardation or contango will occur in the future.

It is likely that both conditions

will occur during different periods.

This period of contango continued through December 31, 2017.

Declining global crude oil inventories caused the market to flip into backwardation at the beginning of 2018 through late October 2018, at which point ongoing supply growth in the U.S., combined with increased OPEC production, once again led market participants to fear another global glut of crude oil.

The crude oil market was primarily in contango the first half of 2019 and in backwardation during the second half of 2019.

Crude oil flipped back into contango in January 2020 and remained predominantly in contango throughout 2020.

In March 2020, contango dramatically increased and reached historic levels during the economic crisis arising from the COVID-19 pandemic and disputes among oil producing nations regarding limits on oil production levels.

This level of contango was due to significant market volatility that occurred in crude oil markets as well as oil futures markets.

Crude oil prices collapsed in the wake of the COVID-19 demand shock, which reduced global petroleum consumption, and the price war launched by Saudi Arabia at the beginning of March 2020 in response to Russia's unwillingness to participate in extending previously agreed upon supply cuts.

An estimated twenty million barrels a day of crude demand evaporated as a result of quarantines and massive drops in industrial and manufacturing activity.

Eventually, the United States, OPEC, Russia, and other oil producers around the world agreed to a historic 9.7 million barrel per day cut to crude supply.

The supply cut along with the partial reopening of economies during the third quarter of 2020 reduced some of the unprecedented volatility oil markets experienced in the spring of 2020.

Likewise, contango returned to moderate levels in May 2020.

USCF believes that holding futures contracts whose expiration dates are spread out over a 12 month period of time will cause the total return of such a portfolio to vary compared to a portfolio that holds only a single month’s contract (such as the near month contract).

In particular, USCF believes that the total return of a portfolio holding contracts with a range of expiration months will be impacted differently by the price relationship between different contract months of the same commodity future compared to the total return of a portfolio consisting of the near month contract.

USCF believes that based on historical evidence a portfolio that held futures contracts with a range of expiration dates spread out over a 12 month period of time would typically be impacted less by the positive effect of backwardation, and less by the negative effect of contango, compared to a portfolio that held contracts of a single near month.

As a result, absent the impact of any other factors, a portfolio of 12 different monthly contracts would tend to have a lower total return than a near month only portfolio in a backwardation market and a higher total return in a contango market.

However, there can be no assurance that such historical relationships would provide the same or similar results in the future.

Periods of contango or backwardation do not materially impact USL’s investment objective of having the daily percentage changes in its per share NAV track the daily percentage changes in the average of the prices of the Benchmark Oil Futures Contracts since the impact of backwardation and contango tend to equally impact the daily percentage changes in price of both USL’s shares and the Benchmark Oil Futures Contracts.

It is impossible to predict with any degree of certainty whether backwardation or contango will occur in the future.

It is likely that both conditions will occur during different periods.

Contango may persist for the foreseeable future, potentially at extreme levels at times, as a result of the ongoing uncertainty in the wake of the COVID-19 crisis.

Crude Oil Market.

During the year

ended December, 31 2019, crude oil prices traded in a range between $45.33 to $66.30.

Crude oil rose 34.46% from the end of 2018

through December 31, 2019 finishing the year at $54.07.

Crude prices peaked in April and declined through October as a result of

falling global growth forecasts, negative economic news, and persistently declining oil demand growth, all of which were at least

partially the result of the ongoing trade wars.

Prices briefly spiked 14.68% following the September 16, 2019 attacks on Saudi

oil facilities that knocked out five percent of global daily supply, but quickly fell back on ongoing negative sentiment and economic

Prices rose again in the fourth quarter of 2019, as global crude oil and liquid fuels inventories declined slightly, OPEC

signaled and delivered further output cuts, the U.S.

and China reached a “Phase One” trade deal, and further geopolitical

risks surfaced.

While OPEC has been aggressive about meeting target cuts, continued growth in U.S.

shale production also threatens

to oversupply the market relative to demand growth.

All three major energy agencies (OPEC, EIA, IEA) have lowered their 2020 demand

growth forecasts.

Should demand continue moderating or turn negative, crude prices would likely fall further.

However, geopolitical

risk has increased, while a geopolitical risk premium only briefly materialized in the price of crude.

Further surprise attacks

on crude infrastructure or conflicts in the Middle East would likely create volatility to the upside, should such events occur.

Crude Oil Price Movements in Comparison

to Other Energy Commodities and Investment Categories.

USCF believes that investors frequently measure the degree to which

prices or total returns of one investment or asset class move up or down in value in concert with another investment or asset class.

Statistically, such a measure is usually done by measuring the correlation of the price movements of the two different investments

or asset classes over some period of time.

The correlation is scaled between 1 and -1, where 1 indicates that the two investment

options move up or down in price or value together, known as “positive correlation,” and -1 indicates that they move

in completely opposite directions, known as “negative correlation.” A correlation of 0 would mean that the movements

of the two are neither positively nor negatively correlated, known as “non-correlation.” That is, the investment options

sometimes move up and down together and other times move in opposite directions.

For the ten-year time period between December 31, 2009

and December 31, 2019, the table below compares the monthly movements of crude oil prices versus the monthly movements of the

prices of several other energy commodities, such as natural gas, diesel-heating oil, and unleaded gasoline, as well as several

major non-commodity investment asset classes, such as large cap U.S.

During the year ended December 31, 2019, front month crude oil futures prices traded in a range between $(37.63) to $63.27.

Crude oil declined (20.54)% from the end of 2019 through December 31, 2020 finishing the quarter at $48.52.

The simultaneous demand and supply shocks from the COVID-19 pandemic and Saudi-Russia price war precipitated unparalleled risk and volatility in crude oil markets during the first half of 2020.

Global demand for crude oil plummeted by as much as 30% in the spring of 2020 as workers around the world stopped driving, airlines cut flight schedules, and companies suspended operations.

Meanwhile, U.S.

crude oil supply reached 13 million barrels per day (mbd), capping a period of almost continuous growth since 2016.

To offset the seemingly unstoppable U.S.

production juggernaut, OPEC+ (a loose coalition between OPEC and non-member nations such as Russia and Mexico) had maintained an uneasy series of agreements to curtail their crude oil output in order to support crude oil prices.

However, in early March of 2020, Russia

refused Saudi Arabia’s proposal to extend cuts in response to the COVID-19 demand shock.

The kingdom retaliated with a massive production increase, launching an all-out price war in the middle of a pandemic.

Although the members of OPEC+ reached a record-shattering agreement in mid-April of 2020, the implementation of new supply cuts came too late to prevent crude oil prices from plummeting to historic lows, culminating in a drop into negative territory for the May WTI crude oil futures contract on April 20, 2020.

During the second quarter of 2020, the International Energy Agency (IEA) reported that crude oil demand fell an average of 16.4 mbd while global crude oil supply declined by an average of 13.7 mbd.

Demand evaporated as a result of quarantines and massive drops in industrial and manufacturing activity.

Supply declined largely due to the historic agreement in April between the United States, OPEC, Russia, and other oil producers.

The bulk of the supply decline came from voluntary OPEC+ cuts while 2.8 mbd resulted from market-driven cuts in the United States.

As of June 30, 2020, U.S.

production had dropped over 15%, rapidly falling back to 11 mbd.

Oil producing rigs in the United States fell to 180 from over 670 at the start of the year, a massive decline that will likely see U.S.

supply fall further.

Finally, in late June storage in the U.S.

spiked to 541 million barrels while global storage reached 3.351 billion barrels.

The unprecedented twin crises described above caused unparalleled effects on oil futures markets.

First, WTI crude oil prices dipped below $20 for the first time since 2002 and hit an all-time closing low of $(37.63).

Multiple record-breaking returns occurred between March and May of 2020.

The price of the U.S.

benchmark averaged $28 during the second quarter of 2020 compared to $46 during the first quarter of 2020 and $57 during calendar year 2019.

Second, crude oil price volatility went off-the-charts.

For example, the 30-day annualized volatility of front month WTI crude oil futures prices reached 993% after averaging 35% in 2019 and 25% in the first two months of 2020.

(If May crude oil futures had not gone negative on April 20, 2020, volatility would “only” have reached 416)%.

Third, futures curves, which can exhibit conditions known as “contango” and “backwardation, moved into a condition that some market experts referred to as “super contango.” This was a result of extreme bearishness at the front of the futures curve due to rapidly filling storage facilities in the U.S.

and around the world.

Specifically, the front month WTI crude oil futures contract detached from the rest of the futures curve and fell to an extreme position relative to deferred futures contract months.

On a percentage basis, the difference between the front month WTI crude oil futures contract and the second month WTI crude oil futures contract was more than double the previous record.

This divergence caused WTI crude oil futures contracts with different expiration dates to move in different directions.

For example, the front month WTI crude oil futures contract and second month WTI crude oil futures contract typically move together (i.e., increase or decrease) about 99% of the time.

However, in late April of 2020, the correlation of the front and second month WTI crude oil futures contracts was (24)%, meaning these contracts were moving in opposite directions.

Fourth, market participants moved away from the front of the futures curve in favor of deferred contract months.

The move to deferred contract months caused a historic change to relative levels of open interest among the different futures contracts.

For example, open interest in the front month futures contract fell an average of 40% during April, May, and June of 2020 compared to the average level of open interest during those same calendar months during the previous five years.

More recently, as economies reopened and OPEC+ supply cuts were absorbed by the market, WTI crude oil prices rose from all-time lows in the spring of 2020 to stabilize around $40 per barrel in June through October.

Crude prices rose further in November and December to finish the year at $48.52.

WTI crude oil inventories in the United States fell from a modern record of 541 million barrels (mb) in June to 493 mb by the end of 2020.

Meanwhile crude oil production in the United States declined below 10 mb per day during the second half of 2020 after peaking over 13 mb per day in March 2020.

The full impact of the world's response to the COVID-19 pandemic still has not been determined, and the winter surge in cases coupled with slow vaccine rollouts suggest that more economic pain may lie ahead.

At this stage, it is impossible to predict whether crude oil prices will rise, fall, or remain stable.

High risk remains in oil markets until demand and supply are fully balanced and the full impact of past, current, and future COVID-19 pandemic mitigation measures is known.

C rude Oil Price Movements in Comparison to Other Energy Commodities and Investment Categories.

USCF believes that investors frequently measure the degree to which prices or total returns of one investment or asset class move up or down

in value in concert with another investment or asset class.

Statistically, such a measure is usually done by measuring the correlation of the price movements of the two different investments or asset classes over some period of time.

The correlation is scaled between 1 and -1, where 1 indicates that the two investment options move up or down in price or value together, known as “positive correlation,” and -1 indicates that they move in completely opposite directions, known as “negative correlation.” A correlation of 0 would mean that the movements of the two are neither positively nor negatively correlated, known as “non-correlation.” That is, the investment options sometimes move up and down together and other times move in opposite directions.

For the ten-year time period between December 31, 2010 and December 31, 2020, the table below compares the monthly movements of crude oil prices versus the monthly movements of the prices of several other energy commodities, such as natural gas, diesel-heating oil, and unleaded gasoline, as well as several major non-commodity investment asset classes, such as large cap U.S.

equities, U.S.

government bonds and global equities.

be seen that over this particular time period, the movement of crude oil on a monthly basis exhibited strong correlation with

unleaded gasoline and diesel-heating oil, moderate correlation with the movements of large cap U.S.

equities and global equities,

limited correlation with natural gas, and limited negative correlation with U.S.

It can be seen that over this particular time period, the movement of crude oil on a monthly basis exhibited strong correlation with unleaded gasoline and diesel-heating oil, moderate correlation with the movements of large cap U.S.

equities and global equities, no correlation with natural gas, and limited negative correlation with U.S.

government bonds.

*PAST PERFORMANCE IS NOT NECESSARILY

INDICATIVE OF FUTURE RESULTS

Correlation Matrix

December 31, 2009 – December 31, 2019*

Large Cap U.S.

Equities (S&P 500)

Bonds (EFFAS U.S.

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

Correlation Matrix 10 Years

Large Cap US Equities (S&P 500)

US Gov’t Bonds (BEUSG4 Index)

Global Equities (FTSE World Index)

Unleaded Gasoline

Diesel-Heating Oil

Bloomberg, NYMEX

The table below covers a more recent, but much shorter, range of dates than the above table.

Over the one year period ended December

31, 2019, movements of crude oil displayed strong correlation with large cap U.S.

equities, global equities, unleaded gasoline

and diesel-heating oil and limited to negative correlation with movements with natural gas and U.S.

Over the one year period ended December 31, 2020, movements of crude oil displayed strong correlation with large cap U.S.

equities, global equities, unleaded gasoline and diesel-heating oil and limited negative correlation with movements with natural gas and U.S.

Government bonds.

*PAST PERFORMANCE IS NOT NECESSARILY

INDICATIVE OF FUTURE RESULTS

Correlation Matrix

12 Months ended December 31, 2019*

Large Cap U.S.

Equities (S&P 500)

Bonds (EFFAS U.S.

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

Correlation Matrix 1 Year

Large Cap US Equities (S&P 500)

US Gov’t Bonds (BEUSG4 Index)

Global Equities (FTSE World Index)

Unleaded Gasoline

Diesel-Heating Oil

Bloomberg, NYMEX

Investors are cautioned that the historical

price relationships between crude oil and various other energy commodities, as well as other investment asset classes, as measured

by correlation may not be reliable predictors of future price movements and correlation results.

The results pictured above would

have been different if a different range of dates had been selected.

USCF believes that crude oil has historically not demonstrated

a strong correlation with equities or bonds over long periods of time.

However, USCF also believes that in the future it is possible

that crude oil could have long term correlation results that indicate prices of crude oil more closely track the movements of equities

In addition, USCF believes that, when measured over time periods shorter than ten years, there will always be some periods

where the correlation of crude oil to equities and bonds will be either more strongly positively correlated or more strongly negatively

correlated than the long term historical results suggest.

The correlations between crude oil, natural

gas, diesel-heating oil and gasoline are relevant because USCF endeavors to invest USL’s assets in Oil Futures Contracts

and Other Oil-Related Investments so that daily changes in percentage terms in USL’s per share NAV correlate as closely as

possible with daily changes in percentage terms in the average price of the Benchmark Oil Futures Contracts.

If certain other fuel-based

commodity futures contracts do not closely correlate with the crude-oil futures contracts, then their use could lead to greater

tracking error.

As noted above, USCF also believes that the changes in percentage terms in the average price of the Benchmark Oil

Futures Contracts will closely correlate with changes in percentage terms in the spot price of light, sweet crude oil.

Investors are cautioned that the historical price relationships between crude oil and various other energy commodities, as well as other investment asset classes, as measured by correlation may not be reliable predictors of future price movements and correlation results.

The results pictured above would have been different if a different range of dates had been selected.

USCF believes that crude oil has historically not demonstrated a strong correlation with equities or bonds over long periods of time.

However, USCF also believes that in the future it is possible that crude oil could have long term correlation results that indicate prices of crude oil more closely track the movements of equities or bonds.

In addition, USCF believes that, when measured over time periods shorter than ten years, there will always be some periods where the correlation of crude oil to equities and bonds will be either more strongly positively correlated or more strongly negatively correlated than the long term historical results suggest.

The correlations between crude oil, natural gas, diesel-heating oil and gasoline are relevant because USCF endeavors to invest USL’s assets in Oil Futures Contracts and Other Oil-Related Investments so that daily changes in percentage terms in USL’s per share NAV correlate as closely as possible with daily changes in percentage terms in the average price of the Benchmark Oil Futures Contracts.

If certain other fuel-based commodity futures contracts do not closely correlate with the crude-oil futures contracts, then their use could lead to greater tracking error.

As noted above, USCF also believes that the changes in percentage terms in the average price of the Benchmark Oil Futures Contracts will closely correlate with changes in percentage terms in the spot price of light, sweet crude oil.

For the Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

The comparison of the fiscal years ended December 31, 2019 and 2018 can be found in USL’s annual report on Form 10-K for the fiscal year ended December 31, 2019 located within Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations, which is incorporated by reference herein.

Critical Accounting Policies

Preparation of the financial statements

and related disclosures in compliance with accounting principles generally accepted in the United States of America requires the

application of appropriate accounting rules and guidance, as well as the use of estimates.

USL's application of these policies

involves judgments and actual results may differ from the estimates used.

USCF has evaluated the nature and types

of estimates that it makes in preparing USL's financial statements and related disclosures and has determined that the valuation

of its investments, which are not traded on a United States or internationally recognized futures exchange (such as forward contracts

and OTC swaps) involves a critical accounting policy.

The values which are used by USL for its Oil Futures Contracts

are provided by its commodity broker who uses market prices when available, while OTC swaps are valued based on the present value

of estimated future cash flows that would be received from or paid to a third party in settlement of these derivative contracts

prior to their delivery date and valued on a daily basis.

In addition, USL estimates interest and dividend income on a daily

basis using prevailing rates earned on its cash and cash equivalents.

These estimates are adjusted to the actual amount received

on a monthly basis and the difference, if any, is not considered material.

Preparation of the condensed financial statements and related disclosures in compliance with accounting principles generally accepted in the United States of America requires the application of appropriate accounting rules and guidance, as well as the use of estimates.

USL’s application of these policies involves judgments and actual results may differ from the estimates used.

USCF has evaluated the nature and types of estimates that it makes in preparing USL’s condensed financial statements and related disclosures and has determined that the valuation of its investments, which are not traded on a United States or internationally recognized futures exchange (such as forward contracts and OTC swaps) involves a critical accounting policy.

The values which are used by USL for its Oil Futures Contracts are provided by its commodity broker who uses market prices when available, while OTC swaps are valued based on the present value of estimated future cash flows that would be received from or paid to a third party in settlement of these derivative contracts prior to their delivery date and valued on a daily basis.

In addition, USL estimates interest and dividend income on a daily basis using prevailing rates earned on its cash and cash equivalents.

These estimates are adjusted to the actual amount received on a monthly basis and the difference, if any, is not considered material.

Liquidity and Capital Resources

USL has not made, and does not anticipate

making, use of borrowings or other lines of credit to meet its obligations.

USL has met, and it is anticipated that USL

will continue to meet, its liquidity needs in the normal course of business from the proceeds of the sale of its investments, or

from the Treasuries, cash and/or cash equivalents that it intends to hold at all times.

USL has not made, and does not anticipate making, use of borrowings or other lines of credit to meet its obligations.

USL has met, and it is anticipated that USL will continue to meet, its liquidity needs in the normal course of business from the proceeds of the sale of its investments, or from the Treasuries, cash and/or cash equivalents that it intends to hold at all times.

USL’s liquidity needs include:

shares, providing margin deposits for its existing Oil Futures Contracts or the purchase of additional Oil Futures Contracts

and posting collateral for its OTC swaps, if applicable, and payment of its expenses, summarized below under “Contractual

Obligations.”

USL currently generates cash

primarily from:

(i) the sale of baskets consisting of 50,000 shares (“Creation Baskets”) and (ii) income earned

on Treasuries, cash and/or cash equivalents.

redeeming shares, providing margin deposits for its existing Oil Futures Contracts or the purchase of additional Oil Futures Contracts and posting collateral for its OTC swaps, if applicable, and payment of its expenses, summarized below under “Contractual Obligations.”

USL currently generates cash primarily from:

(i) the sale of baskets consisting of 50,000 shares (“Creation Baskets”) and (ii) income earned on Treasuries, cash and/or cash equivalents.

USL has allocated substantially all of its net assets to trading in Oil Interests.

invests in Oil Interests to the fullest extent possible without being leveraged or unable to satisfy its current or potential

margin or collateral obligations with respect to its investments in Oil Futures Contracts and Other Oil-Related Investments.

A significant portion of USL's NAV is held in cash and cash equivalents that are used as margin and as collateral for its

trading in Oil Interests.

The balance of the assets is held in USL's account at its custodian bank and in Treasuries

USL invests in Oil Interests to the fullest extent possible without being leveraged or unable to satisfy its current or potential margin or collateral obligations with respect to its investments in Oil Futures Contracts and

Other Oil-Related Investments.

A significant portion of USL's NAV is held in cash and cash equivalents that are used as margin and as collateral for its trading in Oil Interests.

The balance of the assets is held in USL's account at its custodian bank and in investments in money market funds and Treasuries at the FCMs.

Income received from USL's investments in money market funds and Treasuries is paid to USL.

During the year

ended December 31, 2019, USL's expenses did not exceed the income USL earned and the cash earned from the sale of Creation

Baskets and the redemption of Redemption Baskets.

During the year ended December 31, 2018, USL's expenses did not exceed the income

USL earned and the cash earned from the sale of Creation Baskets and the redemption of Redemption Baskets.

To the extent expenses

exceed income, USL's NAV will be negatively impacted.

USL's investments in Oil Interests

may be subject to periods of illiquidity because of market conditions, regulatory considerations and other reasons.

most commodity exchanges limit the fluctuations in futures contracts prices during a single day by regulations referred to as “daily

limits.” During a single day, no trades may be executed at prices beyond the daily limit.

Once the price of a futures contract

has increased or decreased by an amount equal to the daily limit, positions in the contracts can neither be taken nor liquidated

unless the traders are willing to effect trades at or within the specified daily limit.

Such market conditions could prevent USL

from promptly liquidating its positions in Oil Futures Contracts.

During the year ended December 31, 2019, USL did not purchase

or liquidate any of its positions while daily limits were in effect;

however, USL cannot predict whether such an event

may occur in the future.

Prior to the initial offering of USL, all

payments with respect to USL’s expenses were paid by USCF.

USL does not have an obligation or intention to refund such payments

During the year ended December 31, 2020, USL's expenses did exceed the income USL earned and the cash earned from the sale of Creation Baskets and the redemption of Redemption Baskets.

During the year ended December 31, 2019, USL's expenses exceeded the income USL earned and the cash earned from the sale of Creation Baskets and the redemption of Redemption Baskets.

To the extent expenses exceed income, USL's NAV will be negatively impacted.

USL’s investments in Oil Interests may be subject to periods of illiquidity because of market conditions, regulatory considerations and other reasons.

For example, most commodity exchanges limit the fluctuations in futures contracts prices during a single day by regulations referred to as “daily limits.” During a single day, no trades may be executed at prices beyond the daily limit.

Once the price of a futures contract has increased or decreased by an amount equal to the daily limit, positions in the contracts can neither be taken nor liquidated unless the traders are willing to effect trades at or within the specified daily limit.

Such market conditions could prevent USL from promptly liquidating its positions in Oil Futures Contracts.

During the year ended December 31, 2020, USL did not purchase or liquidate any of its positions while daily limits were in effect;

however, USL cannot predict whether such an event may occur in the future.

Prior to the initial offering of USL, all payments with respect to USL’s expenses were paid by USCF.

USL does not have an obligation or intention to refund such payments by USCF.

USCF is under no obligation to pay USL’s current or future expenses.

Since the initial offering of shares, USL has

been responsible for expenses relating to:

(i) management fees, (ii) brokerage fees and commissions, (iii) licensing fees for the

use of intellectual property, (iv) ongoing registration expenses in connection with offers and sales of its shares subsequent to

the initial offering, (v) other expenses, including tax reporting costs, (vi) fees and expenses of the independent directors of

USCF and (vii) other extraordinary expenses not in the ordinary course of business, while USCF has been responsible for expenses

relating to the fees of USL's Marketing Agent, Administrator and Custodian and registration expenses relating to the initial offering

If USCF and USL are unsuccessful in raising sufficient funds to cover these respective expenses or in locating any other

source of funding, USL will terminate and investors may lose all or part of their investment.

Trading in Oil Futures Contracts and

Other Oil-Related Investments, such as forwards, involves USL entering into contractual commitments to purchase or sell oil

at a specified date in the future.

The aggregate market value of the contracts will significantly exceed USL's future cash

requirements since USL intends to close out its open positions prior to settlement.

As a result, USL is generally only

subject to the risk of loss arising from the change in value of the contracts.

USL considers the “fair value”

of its derivative instruments to be the unrealized gain or loss on the contracts.

The market risk associated with USL's commitments

to purchase oil is limited to the aggregate market value of the contracts held.

However, should USL enter into a contractual

commitment to sell oil, it would be required to make delivery of the oil at the contract price, repurchase the contract at prevailing

prices or settle in cash.

Since the initial offering of shares, USL has been responsible for expenses relating to:

(i) management fees, (ii) brokerage fees and commissions, (iii) licensing fees for the use of intellectual property, (iv) ongoing registration expenses in connection with offers and sales of its shares subsequent to the initial offering, (v) other expenses, including tax reporting costs, (vi) fees and expenses of the independent directors of USCF and (vii) other extraordinary expenses not in the ordinary course of business.

USL may terminate at any time, regardless of whether USL has incurred losses, subject to the terms of the LP Agreement.

In particular, unforeseen circumstances, including, but not limited to, (i) market conditions, regulatory requirements, risk mitigation measures taken by USL or third parties or otherwise that would lead USL to determine that it could no longer foreseeably meet its business objective or that USL's aggregate net assets in relation to its operating expenses or its margin or collateral requirements make the continued operation of USL unreasonable or imprudent, or (ii) adjudication of incompetence, bankruptcy, dissolution, withdrawal or removal of USCF as the general partner of USL could cause USL, to terminate unless a majority interest of the limited partners within 90 days of the event elects to continue the partnership and appoints a successor general partner, or the affirmative vote of a majority in interest of the limited partners subject to certain conditions.

However, no level of losses will require USL to terminate USL.

USL's termination would cause the liquidation and potential loss of an investor's investment.

Termination could also negatively affect the overall maturity and timing of an investor's investment portfolio.

Trading in Oil Futures Contracts and Other Oil-Related Investments, such as forwards, involves USL entering into contractual commitments to purchase or sell oil at a specified date in the future.

The aggregate market value of the contracts will significantly exceed USL's future cash requirements since USL intends to close out its open positions prior to settlement.

As a result, USL is generally only subject to the risk of loss arising from the change in value of the contracts.

USL considers the “fair value” of its derivative instruments to be the unrealized gain or loss on the contracts.

The market risk associated with USL’s commitments to purchase oil is limited to the aggregate market value of the contracts held.

However, should USL enter into a contractual commitment to sell oil, it would be required to make delivery of the oil at the contract price, repurchase the contract at prevailing prices or settle in cash.

Since there are no limits on the future price of oil, the market risk to USL could be unlimited.

USL's exposure to market risk depends

on a number of factors, including the markets for oil, the volatility of interest rates and foreign exchange rates, the liquidity

of the Oil Futures Contracts and Other Oil-Related Investments markets and the relationships among the contracts held by USL.

USL’s exposure to market risk depends on a number of factors, including the markets for oil, the volatility of interest rates and foreign exchange rates, the liquidity of the Oil Futures Contracts and Other Oil-Related Investments markets and the relationships among the contracts held by USL.

Drastic market occurrences could ultimately lead to the loss of all or substantially all of an investor’s capital.

When USL enters into Oil Futures

Contracts and Other Oil-Related Investments, it is exposed to the credit risk that the counterparty will not be able to meet its

The counterparty for the Oil Futures Contracts traded on the NYMEX and on most other futures exchanges is

the clearinghouse associated with the particular exchange.

In general, in addition to margin required to be posted by the clearinghouse

in connection with cleared trades, clearinghouses are backed by their members who may be required to share in the financial burden

resulting from the nonperformance of one of their members and, therefore, this additional member support should significantly reduce

When USL enters into Oil Futures Contracts and Other Oil-Related Investments, it is exposed to the credit risk that the counterparty will not be able to meet its obligations.

The counterparty for the Oil Futures Contracts traded on the NYMEX and on most other futures exchanges is the clearinghouse associated with the particular exchange.

In general, in addition to margin required to be posted by the clearinghouse in connection with cleared trades, clearinghouses are backed by their members who may be required to share in the financial burden resulting from the nonperformance of one of their members and, therefore, this additional member support should significantly reduce credit risk.

USL is not currently a member of any clearinghouse.

Some foreign exchanges are not backed by their clearinghouse

members but may be backed by a consortium of banks or other financial institutions.

There can be no assurance that any counterparty,

clearinghouse, or their members or their financial backers will satisfy their obligations to USL in such circumstances.

USCF attempts to manage the credit risk

of USL by following various trading limitations and policies.

In particular, USL generally posts margin and/or holds

liquid assets that are approximately equal to the market value of its obligations to counterparties under the Oil Futures

Contracts and Other Oil-Related Investments it holds.

USCF has implemented procedures that include, but are not limited to,

executing and clearing trades only with creditworthy parties and/or requiring the posting of collateral or margin by such parties

for the benefit of USL to limit its credit exposure.

An FCM, when acting on behalf of USL in accepting orders to purchase

or sell Oil Futures Contracts on United States exchanges, is required by CFTC regulations to separately account for and segregate

as belonging to USL, all assets of USL relating to domestic Oil Futures Contracts trading.

FCMs are not allowed to commingle USL's

assets with their other assets.

In addition, the CFTC requires FCMs to hold in a secure account USL's assets related

to foreign Oil Futures Contracts trading.

In the future, USL may purchase OTC

swaps, see “Item 7A.

Quantitative and Qualitative Disclosures About Market Risk” in this annual report

on Form 10-K for a discussion of OTC swaps.

As of December 31, 2019, USL held

cash deposits and investments in Treasuries and money market funds in the amount of $51,606,975 with the custodian and FCM.

or all of these amounts held by a custodian or an FCM, as applicable, may be subject to loss should USL's custodian or FCM,

as applicable, cease operations.

Some foreign exchanges are not backed by their clearinghouse members but may be backed by a consortium of banks or other financial institutions.

There can be no assurance that any counterparty, clearinghouse, or their members or their financial backers will satisfy their obligations to USL in such circumstances.

USCF attempts to manage the credit risk of USL by following various trading limitations and policies.

In particular, USL generally posts margin and/or holds liquid assets that are approximately equal to the market value of its obligations to counterparties under the Oil Futures Contracts and Other Oil-Related Investments it holds.

USCF has implemented procedures that include, but are not limited to, executing and clearing trades only with creditworthy parties and/or requiring the posting of collateral or margin by such parties for the benefit of USL to limit its credit exposure.

An FCM, when acting on behalf of USL in accepting orders to purchase or sell Oil Futures Contracts on United States exchanges, is required by CFTC regulations to separately account for and segregate as belonging to USL, all assets of USL relating to domestic Oil Futures Contracts trading.

These FCMs are not allowed to commingle USL's assets with their other assets.

In addition, the CFTC requires FCMs to hold in a secure account USL's assets related to foreign Oil Futures Contracts trading.

In the future, USL may purchase OTC swaps, see “Item 7A.

Quantitative and Qualitative Disclosures About Market Risk” in this annual report on Form 10-K for a discussion of OTC swaps.

As of December 31, 2020, USL held cash deposits and investments in Treasuries and money market funds in the amount of $182,551,168 with the custodian and the FCMs.

Some or all of these amounts held by a custodian or an FCM, as applicable, may be subject to loss should USL's custodian or FCMs, as applicable, cease operations.

Off Balance Sheet Financing

As of December 31, 2019, USL had no

loan guarantee, credit support or other off-balance sheet arrangements of any kind other than agreements entered into in the normal

course of business, which may include indemnification provisions relating to certain risks that service providers undertake in

performing services which are in the best interests of USL.

While USL's exposure under these indemnification provisions cannot

be estimated, they are not expected to have a material impact on USL's financial position.

European Sovereign Debt

USL had no direct exposure to European

sovereign debt as of December 31, 2019 and has no direct exposure to European sovereign debt as of the filing of

this annual report on Form 10-K.

As of December 31, 2020, USL had no loan guarantee, credit support or other off-balance sheet arrangements of any kind other than agreements entered into in the normal course of business, which may include indemnification provisions relating to certain risks that service providers undertake in performing services which are in the best interests of USL.

While USL’s exposure under these indemnification provisions cannot be estimated, they are not expected to have a material impact on USL’s financial position.

Redemption Basket Obligation

In order to meet its investment objective

and pay its contractual obligations described below, USL requires liquidity to redeem shares, which redemptions must be in

blocks of 50,000 shares called “Redemption Baskets.” USL has to date satisfied this obligation by paying

from the cash or cash equivalents it holds or through the sale of its Treasuries in an amount proportionate to the number of shares

being redeemed.

In order to meet its investment objective and pay its contractual obligations described below, USL requires liquidity to redeem shares, which redemptions must be in blocks of 50,000 shares called “Redemption Baskets.” USL has to date satisfied this obligation by paying from the cash or cash equivalents it holds or through the sale of its Treasuries in an amount proportionate to the number of shares being redeemed.

Contractual Obligations

USL's primary contractual obligations

are with USCF.

In return for its services, USCF is entitled to a management fee calculated daily and paid monthly as a fixed percentage

of USL's NAV, currently 0.60% of NAV on its average daily total net assets.

USCF agreed to pay the start-up costs associated

with the formation of USL, primarily its legal, accounting and other costs in connection with USCF’s registration with the

CFTC as a CPO and the registration and listing of USL and its shares with the SEC, FINRA and NYSE Arca (formerly, AMEX), respectively.

However, since USL’s initial offering of shares, offering costs incurred in connection with registering and listing additional

shares of USL have been directly borne on an ongoing basis by USL, and not by USCF.

USCF pays the fees of the Marketing Agent

and the fees of BBH&Co., as well as BBH&Co.’s fees for performing administrative services, including those in connection

with the preparation of USL's financial statements and its SEC, NFA and CFTC reports.

USCF and USL have also entered into a licensing

agreement with the NYMEX pursuant to which USL and the Related Public Funds, other than BNO, USCI and CPER, pay a licensing fee

to the NYMEX.

USL’s primary contractual obligations are with USCF.

In return for its services, USCF is entitled to a management fee calculated daily and paid monthly as a fixed percentage of USL’s NAV, currently 0.60% of NAV on its average daily total net assets.

USCF agreed to pay the start-up costs associated with the formation of USL, primarily its legal, accounting and other costs in connection with USCF’s registration with the CFTC as a CPO and the registration and listing of USL and its shares with the SEC, FINRA and NYSE Arca (formerly, AMEX), respectively.

However, since USL’s initial offering of shares, offering costs incurred in connection with registering and listing additional shares of USL have been directly borne on an ongoing basis by USL, and not by USCF.

USCF pays the fees of the Marketing Agent as well as BNY Mellon’s fees for performing administrative, custodial, and transfer agency services.

BNY Mellon’s fees for performing administrative services include those in connection with the preparation of USL’s condensed financial statements and its SEC, NFA and CFTC reports.

USCF and USL have also entered into a licensing agreement with the NYMEX pursuant to which USL and the Related Public Funds, other than BNO, USCI and CPER, pay a licensing fee to the NYMEX.

USL also pays the fees and expenses associated with its tax accounting and reporting requirements.

In addition to USCF’s management fee, USL pays its brokerage fees (including fees to an FCM), OTC dealer spreads, any licensing

fees for the use of intellectual property, and, subsequent to the initial offering, registration and other fees paid to the SEC,

FINRA, or other regulatory agencies in connection with the offer and sale of shares, as well as legal, printing, accounting and

other expenses associated therewith, and extraordinary expenses.

The latter are expenses not incurred in the ordinary course of

USL’s business, including expenses relating to the indemnification of any person against liabilities and obligations to the

extent permitted by law and under the LP Agreement, the bringing or defending of actions in law or in equity or otherwise conducting

litigation and incurring legal expenses and the settlement of claims and litigation.

Commission payments to an FCM are on a contract-by-contract,

or round turn, basis.

USCF paid BBH&Co.’s fees for performing administrative services, including those in connection with the preparation of USL's condensed financial statements and its SEC, NFA and CFTC reports through May 31, 2020.

In addition to USCF’s management fee, USL pays its brokerage fees (including fees to the FCMs), OTC dealer spreads, any licensing fees for the use of intellectual property, and, subsequent to the initial offering, registration and other fees paid to the SEC, FINRA, or other regulatory agencies in connection with the offer and sale of shares, as well as legal, printing, accounting and other expenses associated therewith, and extraordinary expenses.

The latter are expenses not incurred in the ordinary course of USL’s business, including expenses relating to the indemnification of any person against liabilities and obligations to the extent permitted by law and under the LP Agreement, the bringing or defending of actions in law or in equity or otherwise conducting litigation and incurring legal expenses and the settlement of claims and litigation.

Commission payments to an FCM are on a contract-by-contract, or round turn, basis.

USL also pays a portion of the fees and expenses of the independent directors of USCF.

See Note 3 to

the Notes to Financial Statements in Item 8 of this annual report on Form 10-K.

The parties cannot anticipate the amount

of payments that will be required under these arrangements for future periods, as USL's per share NAVs and trading levels

to meet its investment objective will not be known until a future date.

These agreements are effective for a specific term agreed

upon by the parties with an option to renew, or, in some cases, are in effect for the duration of USL's existence.

party may terminate these agreements earlier for certain reasons described in the agreements.

As of December 31, 2019, USL's portfolio

consisted of 940 Crude Oil Futures CL Contracts traded on the NYMEX.

As of December 31, 2019, USL did not hold any Oil Futures

Contracts traded on the ICE Futures.

See Note 3 to the Notes to Financial Statements in Item 8 of this annual report on Form 10-K.

The parties cannot anticipate the amount of payments that will be required under these arrangements for future periods, as USL’s per share NAVs and trading levels to meet its investment objective will not be known until a future date.

These agreements are effective for a specific term agreed upon by the parties with an option to renew, or, in some cases, are in effect for the duration of USL’s existence.

Either party may terminate these agreements earlier for certain reasons described in the agreements.

As of December 31, 2020, USL's portfolio held 4,069 Crude Oil Futures CL Contracts traded on the NYMEX.

As of December 31, 2020 USL did not hold any Futures Contracts traded on the ICE Futures.

For a list of USL's current holdings, please see USL's website at www.uscfinvestments.com.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis