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Item 1A. Risk Factors

2023-02-27 compared with 2022-02-25 · 109 added, 121 removed, 366 unchanged (39% of the section changed)

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The demand for crude oil correlates closely with general economic growth rates.

The occurrence of recessions or other periods of low or negative economic growth will typically have a direct adverse impact on crude oil prices.

Other factors that affect general economic conditions in the world or in a major region, such as changes in population growth rates, periods of civil unrest, pandemics (e.g.

COVID-19), government austerity programs, or currency exchange rate fluctuations, can also impact the demand for crude oil.

pandemics such as COVID-19) that impair the functioning of financial markets and institutions also may adversely impact the demand for crude oil.

The occurrence of recessions or other periods of low or negative economic growth will typically have a direct adverse impact on crude oil prices, demand and, therefore, may have an adverse impact on crude oil.

Other factors that affect general economic conditions in the world or in a major region, such as changes in population growth rates, periods of civil unrest, military conflicts, war (such as the current war between Russia and Ukraine), pandemics (e.g., COVID-19), government austerity programs, or currency exchange rate fluctuations, can also impact the demand for crude oil.

Sovereign debt downgrades, defaults, inability to access debt markets due to credit or legal constraints, liquidity crises, the breakup or restructuring of fiscal, monetary, or political systems such as the European Union, and other events or conditions (e.g., pandemics such as COVID-19) that impair the functioning of financial markets and institutions also may adversely impact the demand for crude oil.

Other crude oil demand-related factors.

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seasonal weather patterns, which affect the demand for crude oil associated with heating and cooling;

increased competitiveness of alternative energy sources that have so far generally not been competitive with oil

without the benefit of government subsidies or mandates;

and changes in technology or consumer preferences that alter fuel choices, such as toward alternative fueled vehicles.

increased competitiveness of alternative energy sources that have so far generally not been competitive with oil without the benefit of government subsidies or mandates;

and changes in technology or consumer preferences that alter fuel choices, such as toward alternative fueled vehicles or electric transportation and broad-based changes in personal income levels.

Other crude oil supply-related factors.

Crude oil prices also vary depending on a number of factors affecting supply.

Crude oil prices also vary depending on a number of factors affecting supply, including geopolitical risk associated with wars (such as the current war between Russia and Ukraine), terrorist attacks and tensions between countries, including sanctions imposed as a result of the foregoing that can adversely affect crude oil trade flows by limiting or disrupting trade between countries or regions.

For example, increased supply from the development of new oil supply sources and technologies to enhance recovery from existing sources tends to reduce crude oil prices to the extent such supply increases are not offset by commensurate growth in demand.

Similarly, increases in industry refining or petrochemical manufacturing capacity may impact the supply of crude oil.

World oil supply levels can also be affected by factors that reduce available supplies, such as adherence by member countries to OPEC production quotas and the occurrence of wars, hostile actions, natural disasters, disruptions in competitors’ operations, or unexpected unavailability of distribution channels that may disrupt supplies.

World oil supply levels can also be affected by factors that reduce available supplies, such as adherence by member countries to OPEC production quotas and the occurrence of geopolitical risk associated with wars, terrorist attacks and tensions between countries, including sanctions imposed as a result of the foregoing that can adversely affect crude oil trade flows by limiting or disrupting

trade between countries or regions, natural disasters, disruptions in competitors’ operations, or unexpected unavailability of distribution channels that may disrupt supplies.

Technological change can also alter the relative costs for companies in the petroleum industry to find, produce, and refine oil and to manufacture petrochemicals, which in turn may affect the supply of and demand for oil.

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Consequently, you could lose all or substantially all of your investment in USL.

In 2020, in the context of the COVID-19 pandemic, related supply chain disruptions and ongoing disputes among oil-producing countries regarding potential limits on the production of crude oil, significant market volatility occurred in the crude oil markets as well as the oil futures markets.

As a result of this significant market volatility in the oil futures markets, the market price of the front month futures contract fell below zero for a period of time.

If USL had been fully invested in that contract during this time, USL’s per share NAV would have fallen below zero.

The oil futures markets continue to exhibit significant volatility, which could result in significant fluctuation in the NAV of USL’s shares.

Significant market volatility has recently occurred in the crude oil markets.

Such volatility is attributable in part to the COVID-19 pandemic, related supply chair disruptions, war, including the war between Russia and Ukraine, and continuing disputes among oil-producing countries.

These and other events could cause continuing or increased volatility in the future, which may affect the value, pricing and liquidity of some investments or other assets, including those held by or invested in by USL and the impact of which could limit USL’s ability to have a substantial portion of its assets invested in the Benchmark Futures Contracts.

In such a circumstance, USL could, if it determined it appropriate to do so in light of market conditions and regulatory requirements, invest in other Futures Contracts and/or Other Oil-Related Investments.

Russia's invasion of Ukraine, and sanctions brought by the United States and other countries against Russia and others, have caused disruptions in many business sectors, resulting in significant market disruptions that have led to increased volatility in the price of certain commodities, including oil and natural gas, and may lead to volatility in USL’ NAV or share price.

On February 24, 2022, Russia launched a large-scale invasion of Ukraine.

The extent and duration of the military action, and resulting sanctions, and future market or supply disruptions in the region, are impossible to predict, but could be significant and may have a severe adverse effect on the region.

The United States and other countries and certain international organizations have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to Russia's invasion of Ukraine, and additional sanctions may be imposed in the future.

Such sanctions (and any future sanctions) will adversely impact the economies of Russia and Ukraine, and certain sectors of each country's economy may be particularly affected, including but not limited to, financials, energy, metals and mining, engineering and defense and defense-related materials sectors.

Among other things, the extent and duration of the military action, the responses of countries and political bodies to Russia's actions, including sanctions, future market or supply disruptions, and Ukraine's military response and the potential for wider conflict may increase financial market volatility generally, have severe adverse effects on regional and global economic markets, and cause volatility in the markets for commodities including the price of crude oil futures, and the NAV or share price of USL.

A resolution to the war in Ukraine also could impact the markets for certain commodities, and may have collateral impacts, including increased volatility, and cause disruptions to availability of certain commodities, commodity and futures prices and the supply chain globally.

The longer-term impact on commodities and futures prices, including the spot price of crude oil and the prices of the Benchmark Futures Contracts, is difficult to predict and depends on a number of factors that may have a negative impact on USL in the future.

COVID-19 and other infectious disease outbreaks could negatively affect the valuation and performance of USL’s investments.

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COVID-19 has resulted in numerous deaths, travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines and the imposition of both local and more widespread “work from home” measures, cancellations, loss of employment, supply chain disruptions, and lower consumer and institutional demand for goods and services, as well as general concern and uncertainty.

The ongoing spread of COVID-19 has had, and is expected to continue to have, a material adverse impact on local economies in the affected jurisdictions and also on the global economy, as cross border commercial activity and market sentiment are impacted by the outbreak and government and other measures seeking to contain its spread.

The ongoing spread of COVID-19 has had, and may continue to have, a material adverse impact on local economies in the affected jurisdictions and also on the global economy, as cross border commercial activity and market sentiment are impacted by the outbreak and government and other measures seeking to contain its spread.

COVID-19 has had, and is expected to continue to have, a material adverse impact on the crude oil markets and oil futures markets to the extent economic activity and the use of crude oil continues to be curtailed, which in turn has had a significant adverse effect on the prices of Oil Futures Contracts, including the Benchmark Oil Futures Contracts, and Other Oil-Related Contracts.

The impact of COVID-19, and other infectious disease outbreaks that may arise in the future, could adversely affect individual issuers and capital markets in ways that cannot necessarily be foreseen.

The impact of COVID-19, and other infectious disease outbreaks that may arise in the future, could adversely affect individual issuers

and capital markets in ways that cannot necessarily be foreseen.

In addition, actions taken by government and quasi-governmental authorities and regulators throughout the world in response to the COVID-19 outbreak, including significant fiscal and monetary policy changes, may affect the value, volatility, pricing and liquidity of some investments or other assets, including those held by or invested in by USL.

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The duration of the COVID-19 outbreak and its ultimate impact on USL and, on the global economy, cannot be determined with certainty.

The COVID-19 pandemic and its effects may last for an extended period of time, and could result in significant and continued market volatility, exchange trading suspensions and closures, declines in global financial markets, higher default rates, and a substantial economic downturn or recession.

The foregoing could impair USL’s ability to maintain operational standards (such as with respect to satisfying redemption requests), disrupt the operations of USL’s service providers, adversely affect the value and liquidity of USL’s investments, and negatively impact USL’s performance and your investment in USL.

The extent to which COVID-19 continues to affect USL and USL’s service providers and portfolio investments will depend on future developments.

There continues to be uncertainty around the COVID-19 pandemic as the Delta variant of COVID-19, which appears to be the most transmissible and contagious variant to date, has caused an increase in COVID-19 cases globally.

The full impact of the COVID-19 pandemic on our business will depend on factors such as the length of time of the pandemic;

how federal, state and local governments are responding, the impact of the Delta variant, the Omicron variant, and other variants that may emerge;

vaccination rates among the population;

the efficacy of the COVID-19 vaccines against the Delta variant, Omicron variant, and other variants that may

and the longer-term impact of the pandemic on the economy and consumer behavior.

Given the significant economic and financial market disruptions associated with the COVID-19 pandemic, the valuation and performance of USL’s investments could be impacted adversely.

Historical performance of USL and the Benchmark Oil Futures Contracts is not indicative of future performance.

Past performance of USL or the Benchmark Oil Futures Contract is not necessarily indicative of future results.

Therefore, past performance of USL or the Benchmark Oil Futures Contract should not be relied upon in deciding whether to buy shares of USL.

Correlation Risk

An investment in USL may provide little or no diversification benefits.

Thus, in a declining market, USL may have no gains to offset losses from other investments, and an investor may suffer losses on an investment in USL while incurring losses with respect to other asset classes.

Investors purchasing shares to hedge against movements in the price of crude oil will have an efficient hedge only if the price investors pay for their shares closely correlates with the price of crude oil.

Investing in USL’s shares for hedging purposes involves the following risks:

● The market price at which the investor buys or sells shares may be significantly less or more than NAV.

● Daily percentage changes in NAV may not closely correlate with daily percentage changes in the average of the prices of the Benchmark Oil Futures Contracts.

● Daily percentage changes in the average of the prices of the Benchmark Oil Futures Contracts may not closely correlate with daily percentage changes in the price light, sweet crude oil.

Historically, Oil Futures Contracts and Other Oil-Related Investments have generally been non-correlated to the performance of other asset classes such as stocks and bonds.

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In such a case, USL may have no gains to offset losses from other investments, and investors may suffer losses on their investment in USL at the same time they incur losses with respect to other investments.

Variables such as drought, floods, weather, pandemics (such as COVID-19), embargoes, tariffs and other political events may have a larger impact on crude oil prices and crude oil-linked instruments, including Oil Futures Contracts and Other Oil-Related Investments, than on traditional securities.

Variables such as drought, floods, weather, military conflicts, pandemics (such as COVID-19), embargoes, tariffs and other political events may have a larger impact on crude oil prices and crude oil-linked instruments, including Oil Futures Contracts and Other Oil-Related Investments, than on traditional securities.

These additional variables may create additional investment risks that subject USL’s investments to greater volatility than investments in traditional securities.

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In the absence of negative correlation, USL cannot be expected to be automatically profitable during unfavorable periods for the stock market, or vice versa.

Historical performance of USL and the Benchmark Oil Futures Contracts is not indicative of future performance.

Past performance of USL or the Benchmark Oil Futures Contract is not necessarily indicative of future results.

Therefore, past performance of USL or the Benchmark Oil Futures Contract should not be relied upon in deciding whether to buy shares of USL.

Correlation Risk

Investing in USL’s shares for hedging purposes involves the following risks:

● The market price at which the investor buys or sells shares may be significantly less or more than NAV.

● Daily percentage changes in NAV may not closely correlate with daily percentage changes in the average of the prices of the Benchmark Oil Futures Contracts.

● Daily percentage changes in the average of the prices of the Benchmark Oil Futures Contracts may not closely correlate with daily percentage changes in the price light, sweet crude oil.

As of the date of this annual report on Form 10-K, significant market volatility has occurred and is continuing in the crude oil markets and the oil futures markets.

Such volatility is attributable to the COVID-19 pandemic, related supply chain disruptions and continuing disputes among oil-producing countries.

Such events have severely limited USL’s ability to have a substantial portion of its assets invested in the Benchmark Oil Futures Contract.

In light of this, USL has invested in Oil Futures Contracts other than the Benchmark Oil Future Contract.

Also, USL could, if it determined it appropriate in light of market conditions and regulatory requirements, invest in Other Oil-Related Interests.

The market price at which investors buy or sell shares may be significantly less or more than NAV.

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The public trading price at which an investor buys or sells shares during the day from their broker may be different from the NAV of the shares, which is also the price shares can be redeemed with USL by Authorized Participants in Redemption Baskets.

Generally, price differences may relate primarily to supply and demand forces at work in the secondary trading market for shares that are closely related to, but not identical to, the same forces influencing the prices of light, sweet crude oil and the Benchmark Oil Futures Contracts at any point in time.

Generally, price differences may relate primarily to supply and demand forces at work in the secondary trading market for shares that are closely related

to, but not identical to, the same forces influencing the prices of light, sweet crude oil and the Benchmark Oil Futures Contracts at any point in time.

USCF expects that exploitation of certain arbitrage opportunities by Authorized Participants and their clients will tend to cause the public trading price to track NAV per share closely over time, but there can be no assurance of that.

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To the extent an investor purchases shares that include a premium (e.g., because of a shortage of shares in the market due to the inability of Authorized Participants to purchase additional shares from USL that could be resold into the market) and the cause of the premium no longer exists causing the premium to disappear (e.g., because more shares are available for purchase from USL by Authorized Participants that could be resold into the market) such investor’s return on its investment would be adversely impacted due to the loss of the premium.

See the risk factor, An unanticipated number of Creation Basket requests during a short period of time could result in a shortage of shares , below.

The NAV of USL’s shares may also be influenced by non-concurrent trading hours between the NYSE Arca and the various futures exchanges on which crude oil is traded.

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As USL approaches or reaches position limits with respect to the Benchmark Oil Futures Contracts and other Oil Futures Contracts or in view of market conditions, USL invest in Oil Futures Contracts other than the Benchmark Oil Futures Contact and Other Oil-Related Investments.

In addition, USL is not able to replicate exactly the changes in the price of the Benchmark Oil Futures Contracts because the total return generated by USL is reduced by expenses and transaction costs, including those incurred in connection with USL’s trading activities, and increased by interest income from USL’s holdings of Treasuries (defined below).

Tracking the Benchmark Oil Futures Contracts requires trading of USL’s portfolio with a view to tracking the Benchmark Oil Futures Contracts over time and is dependent upon the skills of USCF and its trading principals, among other factors.

Daily percentage changes in the average of the prices of the Benchmark Futures Contracts may not correlate with daily percentage changes in the spot price of crude oil.

The correlation between changes in the average of the prices of the Benchmark Futures Contracts and the spot price of crude oil may at times be only approximate.

The degree of imperfection of correlation depends upon circumstances such as variations in the speculative crude oil market, supply and demand for crude oil Futures Contracts (including the Benchmark Futures Contract) and Other Crude Oil-Related Investments, and technical influences in crude oil futures trading.

An investment in USL is not a proxy for investing in the oil markets, and the daily percentage changes in the price of the Benchmark Oil Futures Contracts, or the NAV of USL, may not correlate with daily percentage changes in the spot price of light, sweet crude oil .

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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 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.

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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.

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.

As of December 31, 2021, USL held 1,902 futures contracts for light, sweet crude oil traded on the NYMEX and did not hold any Oil Futures Contracts traded on the ICE Futures.

As of December 31, 2022, USL did not hold any 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, 2022, 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.

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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 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.

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.

While these limits no longer apply, the position imposed by NYMEX and ICE, described above, do apply.

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

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If USL encounters accountability levels, position limits, or price fluctuation limits for Oil Futures Contracts on the NYMEX or ICE Futures, it may then, if permitted under applicable regulatory requirements, purchase Oil Futures Contracts on other exchanges that trade listed crude oil futures or enter into swaps or other transactions to meet its investment objective.

In addition, if USL exceeds accountability levels on either the NYMEX or ICE Futures, and is required by such exchanges to reduce its

holdings, such reduction could potentially cause a tracking error between the price of USL’s shares and the average of the prices of the Benchmark Oil Futures Contracts.

In addition, if USL exceeds accountability levels on either the NYMEX or ICE Futures, and is required by such exchanges to reduce its holdings, such reduction could potentially cause a tracking error between the price of USL’s shares and the average of the prices of the Benchmark Oil Futures Contracts.

Risk mitigation measures that could be imposed by USL’s FCMs have the potential to cause tracking error by limiting USL’s investments, including its ability to fully invest in the Benchmark Oil Futures Contracts and other Futures Contracts, which could cause the price of USL’s shares to substantially vary from the price of the Benchmark Oil Futures Contracts .

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federal income tax and, in some cases, state, local, or foreign income tax, on their allocable share of USL’s taxable income, without regard to whether they receive distributions or the amount of any distributions.

Therefore, the tax liability of an investor with respect to its shares may exceed the amount of cash or value of property (if any) distributed.

Therefore, the tax liability of an investor with respect to its shares may exceed the amount of cash or value of property (if any) distributed with respect to such shares.

An investor’s allocable share of taxable income or loss may differ from its economic income or loss on its shares.

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This difference could be temporary or permanent and, if permanent, could result in it being taxed on amounts in excess of its economic income.

Items of income, gain, deduction, loss and credit with respect to shares could be reallocated, and USL could be liable for U.S.

Items of income, gain, deduction, loss and credit with respect to shares could be reallocated, for U.S.

federal income tax purposes, and USL could be liable for U.S.

federal income tax, if the IRS does not accept the assumptions and conventions applied by USL in allocating those items, with potential adverse consequences for an investor.

tax rules pertaining to partnerships are complex and their application to large, publicly traded partnerships such as USL is in many respects uncertain.

federal income tax rules pertaining to partnerships are complex and their application to large, publicly traded partnerships such as USL is in many respects uncertain.

USL applies certain assumptions and conventions in an attempt to comply with the intent of the applicable rules and to report taxable income, gains, deductions, losses and credits in a manner that properly reflects shareholders’ economic gains and losses.

These assumptions and conventions may not fully comply with all aspects of the Internal Revenue Code (the “Code”) and applicable Treasury Regulations, however, and it is possible that the IRS will successfully challenge USL’s allocation methods and require USL to reallocate items of income, gain, deduction, loss or credit in a manner that adversely affects investors.

It is possible that the IRS could successfully challenge the application by USL of these assumptions and conventions as not fully complying with all aspects of the Internal Revenue Code of 1986, as amended (the “Code”), and applicable Treasury Regulations, which would require USL to reallocate items of income, gain, deduction, loss or credit in a manner that adversely affects investors.

USL may be liable for U.S.

federal income tax on any “imputed understatement” of tax resulting from an adjustment as a result of an IRS audit.

The amount of the imputed understatement generally includes increases in allocations of items of income or gains to any investor and decreases in allocations of items of deduction, loss, or credit to any investor without any offset for any corresponding reductions in allocations of items of income or gain to any investor or increases in allocations of items of deduction, loss, or credit to any investor.

The amount of the imputed understatement generally includes increases in allocations of items of income or gain to any investor and decreases in allocations of items of deduction, loss, or credit to any investor without any offset for corresponding reductions in allocations of items of income or gain to any investor or increases in allocations of items of deduction, loss, or credit to any investor.

If USL is required to pay any U.S.

federal income taxes on any imputed understatement, the resulting tax liability would reduce the net assets of USL and would likely have an adverse impact on the value of the shares.

Under certain circumstances, USL may be eligible to make an election to cause the investors to take into account the amount of any imputed understatement, including any interest and penalties.

Under certain circumstances, USL may be eligible to make an election to cause the investors to take into account the amount of any imputed understatement, including any associated interest and penalties.

The ability of a publicly traded partnership such as USL to make this election is uncertain.

If the election is made,

USL would be required to provide investors who owned beneficial interests in the shares in the year to which the adjusted allocations relate with a statement setting forth their proportionate shares of the adjustment (“Adjusted K-1s”).

If the election is made, USL would be required to provide investors who owned beneficial interests in the shares in the year to which the adjusted allocations relate with a statement setting forth their proportionate shares of the adjustment (“Adjusted K-1s”).

The investors would be required to take the adjustment into account in the taxable year in which the Adjusted K-1s are issued.

USL could be treated as a corporation for federal income tax purposes, which may substantially reduce the value of the shares.

USL could be treated as a corporation for U.S.

federal income tax purposes, which may substantially reduce the value of the shares.

USL has received an opinion of counsel that, under current U.S.

federal income tax laws, USL will be treated as a partnership that is not taxable as a corporation for U.S.

federal income tax purposes, provided that (i) at least 90 percent of USL’s annual gross income will be derived from (a) income and gains from commodities (not held as inventory) or futures, forwards, options, swaps and other notional principal contracts with respect to commodities, and (b) interest income, (ii) USL is organized and operated in accordance with its governing agreements and applicable law and (iii) USL does not elect to be taxed as a corporation for U.S.

(ii) USL is organized and operated in accordance with its governing agreements and applicable law;

and (iii) USL does not elect to be taxed as a corporation for U.S.

federal income tax purposes.

Although USCF anticipates that USL has satisfied and will continue to satisfy the “qualifying income” requirement for all of its taxable years, that result cannot be assured.

USL has not requested and will not request any ruling from the IRS with respect to its classification as a partnership not taxable as a corporation for U.S.

Although USCF anticipates that USL has satisfied and will continue to satisfy the “qualifying income” requirement for all taxable years, that result cannot be assured.

USL has not requested and will not request any ruling from the IRS with respect to its classification as a partnership taxable as a corporation for U.S.

federal income tax purposes.

If the IRS were to successfully assert that USL is taxable as a corporation for U.S.

federal income tax purposes in any taxable year, rather than passing through its income, gains, losses and deductions proportionately to shareholders, USL would be subject to tax on its net income for the year at corporate tax rates.

In addition, although USCF does not currently intend to make distributions with respect to shares, any distributions would be taxable to shareholders as dividend income to the extent of USL’s current and accumulated earnings and profits.

federal income tax purposes in any taxable year, rather than passing through its income, gains, losses and deductions proportionately to shareholders, USL would be subject to U.S.

federal income tax on its net income for the year at corporate tax rates.

In addition, although USL does not currently intend to make distributions with respect to shares, if USL were treated as a corporation for U.S.

federal income tax purposes, any distributions made with respect to USL shares would be taxable to shareholders as dividend income to the extent of USL’s current and accumulated earnings and profits.

Taxation of USL as a corporation could materially reduce the after-tax return on an investment in shares and could substantially reduce the value of the shares.

USL is organized and operated as a limited partnership in accordance with the provisions of the LP Agreement and applicable state law, and therefore, USL has a more complex tax treatment than traditional mutual funds.

USL is organized and operated as a limited partnership in accordance with the provisions of the LP Agreement and applicable state law.

USL is organized and operated as a limited partnership in accordance with the provisions of the LP Agreement and applicable state law, but it is taxed as a partnership for U.S.

federal income tax purposes.

federal income tax is paid by USL on its income.

Instead, USL will furnish shareholders each year with tax information on IRS Schedule K-1 (Form 1065) and each U.S.

Instead, USL will furnish shareholders each year with tax information on IRS Schedules K-1, K-2, and/or K-3 (Form 1065) and each U.S.

shareholder is required to report on its U.S.

federal income tax return its allocable share of the income, gain, loss and deduction of USL.

federal income tax return its allocable share of the income, gain, loss, deduction and credit of USL.

This must be reported without regard to the amount (if any) of cash or property the shareholder receives as a distribution from USL during the taxable year.

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This could have a material impact on the value of the shares.

The impact of U.S.

tax reform on USL is uncertain.

Legislative or other actions relating to taxes could have a negative effect on USL or our investors.

The impact of changes in U.S.

federal income tax laws on USL is uncertain.

In general, legislative or other actions relating to U.S.

federal income taxes could have a negative effect on USL or its investors.

The rules dealing with U.S.

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Treasury Department.

The Biden Administration has proposed significant changes to the existing U.S.

tax rules, and there are a number of proposals in Congress that would similarly modify the existing U.S.

The likelihood of any such legislation being enacted is uncertain, and we cannot predict with certainty how any changes in the tax laws might affect USL, our investors or our investments.

Investors are urged to consult with their tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our securities.

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the “IRA”) into law.

At this time, we cannot predict with certainty how the provisions of the IRA might affect USL, its investors, or USL’s investments.

OTC Contract Risk

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A counterparty may not be able to meet its obligations to USL, in which case USL could suffer significant losses on these contracts.

The two-way margining requirements imposed by U.S.

regulators, discussed in “Item 1.

Business – Commodities Regulation,” are intended to mitigate this risk.

If a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, USL may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding.

USL may obtain only limited recovery or may obtain no recovery in such circumstances.

USL has sought to mitigate these risks by typically entering into transactions only with major, global financial institutions.

In addition, two-way margining requirements imposed by U.S.

regulators also mitigate such risks.

Valuing OTC derivatives may be less certain than actively traded financial instruments.

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As a result, it may be difficult to obtain an independent value for an outstanding OTC derivatives transaction.

USL is not leveraged.

USL is not leveraged, but it could become leveraged if it had insufficient assets to completely meet its margin or collateral requirements relating to its investments.

USL has not leveraged, and does not intend to leverage, its assets through borrowings or otherwise, and makes its investments accordingly.

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If market conditions require it, USL may implement risk reduction procedures, which may include changes to USL’s investments, and such changes may occur on short notice if they occur other than during a roll or rebalance period.

Although USL does not and will not borrow money or use debt to satisfy its margin or collateral obligations in respect of its investments, it could become leveraged if USL were to hold insufficient assets that would allow it to meet not only the current, but also future, margin or collateral obligations required for such investments.

Such a circumstance could occur if USL were to hold assets that have a value of less than zero.

USCF endeavors to have the value of USL’s Treasuries, cash and cash equivalents, whether held by USL or posted as margin or other collateral, at all times approximate the aggregate market value of its obligations under its Oil Futures Contracts and Other Oil-Related Investments.

Although permitted to do so under its Limited Partnership Agreement, USL has not and does not intend to leverage its assets by making investments beyond its potential ability to meet the potential margin and collateral obligations relating to such investments.

Consistent with this, USL’s investment decisions will take into account the need for USL to make permitted investments that also allow it to maintain adequate liquidity to meet its margin and collateral requirements and to avoid, to the extent reasonably possible, USL becoming leveraged, including by its holding of assets that have a high probability of having a value of less than zero.

If market conditions require it, these risk reduction procedures may occur on short notice.

USL may temporarily limit the offering of Creation Baskets.

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It is difficult to execute a trade at a specific price when there is a relatively small volume of buy and sell orders in a market.

A market disruption, such as a foreign government taking political actions that disrupt the market for its currency, its crude oil production or exports, or another major export, can also make it difficult to liquidate a position.

Because both Oil Futures Contracts and Other Oil-Related Investments may be illiquid, USL’s Crude Oil Interests may be more difficult to liquidate at favorable prices in periods of illiquid markets and losses may be incurred during the period in which

positions are being liquidated.

A market disruption, such as war or a foreign government taking political actions that disrupt the market for its currency, its crude oil production or exports, or another major export, can also make it difficult to liquidate a position.

The large size of the positions that USL may acquire increases the risk of illiquidity both by making its positions more difficult to liquidate and by potentially increasing losses while trying to do so.

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USL is not actively managed by conventional methods.

Accordingly, if USL’s investments in Crude Oil Interests are declining in value, in the ordinary course, USL will not close out such positions except in connection with paying the proceeds to an Authorized Participant upon the redemption of a basket or closing out its positions in Oil Futures Contracts and other permitted investments (i) in connection with the monthly change in the Benchmark Oil Futures Contracts or when USL otherwise determines it would be appropriate to do so, e.g., due to regulatory requirements or risk mitigation measures, or to avoid USL becoming leveraged, and it reinvests the proceeds in new Oil Futures Contracts or Other Oil-Related Investments to the extent possible.

Accordingly, if USL’s investments in Crude Oil Interests are declining in value, in the ordinary course, USL will not close out such positions except in connection with paying the proceeds to an Authorized Participant upon the redemption of a basket or closing out its positions in Oil Futures Contracts and other permitted investments (i) in connection with the monthly change in the Benchmark Oil Futures Contracts or (ii) when USL otherwise determines it would be appropriate to do so, e.g., due to regulatory requirements or risk mitigation measures, or to avoid USL becoming leveraged, and it reinvests the proceeds in new Oil Futures Contracts or Other Oil-Related Investments to the extent possible.

USCF will seek to cause the NAV of USL’s shares to track the Benchmark Oil Futures Contracts during periods in which its price is flat or declining as well as when the price is rising.

Although USL has always had the ability to invest in Oil Futures Contracts beyond the Benchmark Oil Futures Contract and in Other Oil-Related Investments, USL announced its intention to invest in Oil Futures Contracts other than the Benchmark Oil Futures Contract and that it could, if it determined it appropriate in light of market conditions and regulatory requirements, invest in Other Oil-Related Interests.

As of the date of this annual report on Form 10-K, it is likely that the factors limiting USL’s investments in the Benchmark Oil Futures Contract will continue, including as a result of the COVID-19 pandemic and the state of the crude oil markets, and USL may determine to invest in Other Oil Futures Contracts and, Other Oil-Related Investments.

USL’s ability to invest in the Benchmark Oil Futures Contract could be limited as a result of any or all of the following:

evolving market conditions, a change in regulatory accountability levels and position limits imposed on USL with respect to its investment in Oil Futures Contracts, additional or different risk mitigation measures taken by market participants, generally, including USL, with respect to USL acquiring additional Oil Futures Contracts, or USL selling additional shares.

Accordingly, for the foreseeable future, to address and comply with the market conditions, regulatory requirements and other factors that have influenced, and will continue to influence, its investment decisions, USL intends to buy or sell its permitted investments when USL increases or decreases either its portfolio overall or its holdings of particular investments.

USL may not meet the listing standards of NYSE Arca, which would adversely impact an investor’s ability to sell shares.

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Shareholders that are not Authorized Participants may only purchase or sell their shares in secondary trading markets, and the conditions associated with trading in secondary markets may adversely affect investors’ investment in the shares.

Only Authorized Participants may directly purchase from or redeem shares with USL through Creation Baskets or Redemption Baskets, respectively.

Only Authorized Participants may directly purchase shares from or redeem shares with USL through Creation Baskets or Redemption Baskets, respectively.

All other investors that desire to purchase or sell shares must do so through the NYSE Arca or in other markets, if any, in which the shares may be traded.

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If an investor needs to sell shares at a time when no active trading market for them exists, the price the investor receives upon sale of the shares, assuming they were able to be sold, likely would be lower than if an active market existed.

USL could become leveraged if it had insufficient assets to completely meet its margin or collateral requirements relating to its investments .

Such a circumstance could occur if USL were to hold assets that have a value of less than zero.

If market conditions require it, these risk reduction procedures may occur on short notice.

Limited partners and shareholders do not participate in the management of USL and do not control USCF, so they do not have any influence over basic matters that affect USL.

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Delaware law provides that a limited partner who receives such a distribution and knew at the time of the distribution that the distribution violated the law will be liable to the limited partnership for the amount of the distribution for three years from the date of the distribution.

The LLC Agreement provides limited authority to the Non-Management Directors, and any Director of USCF may be removed by USCF’s parent company, which is wholly owned by Concierge, a controlled public company where the majority of shares are owned by Nicholas D.

USCF’s LLC Agreement provides limited authority to the Non-Management Directors, and any Director of USCF may be removed by USCF’s parent company, which is wholly owned by The Marygold Companies, Inc., a controlled public company where the majority of shares are owned by Nicholas D.

Gerber along with certain of his other family members and certain other shareholders.

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Under USCF’s LLC Agreement, the Non-Management Directors have only such authority as the Management Directors expressly confer upon them, which means that the Non-Management Directors may have less authority to control the actions of the Management Directors than is typically the case with the independent members of a company’s Board of Directors.

In addition, any Director may be removed by written consent of Wainwright Holdings, Inc.

(“Wainwright”), which is the sole member of USCF.

The sole shareholder of Wainwright is Concierge Technologies, Inc., a company publicly traded under the ticker symbol “CNCG” (“Concierge”).

Gerber, along with certain of his family members and certain other shareholders, owns the majority of the shares in Concierge, which is the sole shareholder of Wainwright, the sole member of USCF.

In addition, any Director may be removed by written consent of USCF Investments, Inc.

(“USCF Investments”), formerly Wainwright Holdings, Inc., which is the sole member of USCF.

The sole shareholder of USCF Investments is The Marygold Companies, Inc., formerly Concierge Technologies, Inc., (“Marygold”) a company publicly traded under the ticker symbol “MGLD”.

Gerber, along with certain of his family members and certain other shareholders, owns the majority of the shares in Marygold, which is the sole shareholder of USCF Investments, the sole member of USCF.

Accordingly, although USCF is governed by the USCF Board of Directors, which consists of both Management Directors and Non-Management Directors, pursuant to the LLC Agreement, it is possible for Mr.

Gerber to exercise his indirect control of Wainwright to effect the removal of any Director (including the Non-Management Directors which comprise the Audit Committee) and to replace that Director with another Director.

Having control in one person could have a negative impact on USCF and USL, including their regulatory obligations.

Gerber to exercise his indirect control of USCF Investments to effect the removal of any Director (including the Non-Management Directors which comprise the Audit Committee) and to replace that Director with another Director.

Having control in one person could have a negative impact on USCF and USL, including its regulatory obligations.

There is a risk that USL will not earn trading gains sufficient to compensate for the fees and expenses that it must pay and as such USL may not earn any profit.

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USL is responsible for establishing and maintaining adequate internal control over financial reporting.

USL’s internal control system is designed to provide reasonable assurance to its management regarding the preparation and fair presentation of published financial

USL’s internal control system is designed to provide reasonable assurance to its management regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations.

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By way of example, if, as a result of reaching position limits imposed by the NYMEX, USL purchased oil futures contracts, this decision could impact USL’s ability to purchase additional oil futures contracts if the number of contracts held by funds managed by USCF reached the maximum allowed by the NYMEX.

Similar situations could adversely affect the ability of any fund to track its Benchmark Oil Futures Contract.

USL may also be subject to certain conflicts with respect to its FCMs, including, but not limited to, conflicts that result from receiving greater amounts of compensation from other clients, or purchasing opposite or competing positions on behalf of third party accounts traded through the FCMs.

Similar situations could adversely affect the ability of other Related Public Funds to track their benchmark futures contract(s).

USL may also be subject to certain conflicts with respect to its FCMs, including, but not limited to, conflicts that result from the FCM receiving greater amounts of compensation from other clients, or purchasing opposite or competing positions on behalf of third party accounts traded through the FCMs.

In addition, USCF’s principals, officers, directors or employees may trade futures and related contracts for their own account.

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As a consequence, it could be necessary to liquidate positions in USL’s trading positions before the time that the trading strategies would otherwise dictate liquidation.

An unanticipated number of Creation Basket requests during a short period of time could result in a shortage of shares.

USCF makes every effort to predict and maintain an adequate amount of shares outstanding.

However, if a substantial number of requests for Creation Baskets are received by USL during a relatively short period of time that substantially differ from past creation volumes, due to market volatility or otherwise (including, for example, the volatility that occurred during the COVID-19 pandemic, related supply chain disruptions and ongoing disputes among oil-producing countries regarding limits on the production of crude oil), there could be a shortage of USL shares.

Among other things, such conditions could result in circumstances where USL may not have sufficient shares available for sale to satisfy demand and Authorized Participants may, therefore, be unable to purchase additional Creation Baskets.

This was the case immediately prior to the date of this annual report on Form 10-K as a result of the COVID-19 pandemic, related supply chain disruptions and ongoing disputes among oil-producing countries.

The suspension in the ability of Authorized Participants to purchase Creation Baskets could cause USL’S NAV to differ materially from its trading price

In the event that there was a suspension in the ability of Authorized Participants to purchase additional Creation Baskets, Authorized Participants and other groups that make a market in shares of USL would likely still continue to actively trade the shares.

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USL may determine that to allow it to reinvest the proceeds from sales of its Creation Baskets in currently permitted assets in a manner that meets its investment objective it may limit its offers of Creation Baskets.

USL may determine that USL will limit the issuance of its shares through the offering of Creation Baskets to its Authorized Participants.

USL may determine to limit the issuance of its shares through the offering of Creation Baskets to its Authorized Participants.

As a result of certain circumstances described herein, including (1) the need to comply with regulatory requirements (including, but not limited to, exchange accountability levels and position limits);

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and (3) risk mitigation measures taken by USL’s current and other FCMs that limit USL and other market participants from investing in particular crude oil futures contracts, USL’s management can determine that it will limit the issuance of shares and the offerings of Creation Baskets because it is unable to invest the proceeds from such offerings in investments that would permit it to reasonably meet its investment objective.

If such a determination is made, the same consequences associated with a suspension of the offering of Creation Baskets, as described in the foregoing risk factor, “An unanticipated number of Creation Basket requests during a short period of time could result in a shortage of shares, could also occur as a result of USL determining to limit the offering of creation baskets.”

The value of Treasury Bills and Money Market securities held by USL will fluctuate in value with changes in interest rates .

If such a determination is made, the same consequences associated with a suspension of the offering of Creation Baskets, as described in the foregoing risk factor, “The suspension in the ability of Authorized Participants to purchase Creation Baskets could cause USL’S the Trust’s NAV to differ materially from its trading price,” could also occur as a result of USL determining to limit the offering of creation baskets.”

In a rising rate environment, USL may not be able to fully invest at prevailing rates until any current investments in Treasury Bills mature in order to avoid selling those investments at a loss.

When interest rates rise, the value of fixed income securities typically falls.

In a rising rate environment, USL may not be able to fully invest at prevailing rates until any current investments in Treasury Bills mature in order to avoid selling those investments at a loss.

Interest rate risk is generally lower for shorter term investments and higher for longer term investments.

USL may be subject to a greater risk of rising interest rates than would normally be the case due to the current period of historically low rates and the effect of potential fiscal policy initiatives and resulting market reaction to those initiatives.

The risk to USL of rising interest rates may be greater in the future due to the end of a long period of historically low rates, the effect of potential monetary policy initiatives, including actions taken by the U.S.

Federal Reserve and other foreign equivalents to curb inflation, and resulting market reactions to those initiatives.

When interest rates fall, USL may be required to reinvest the proceeds from the sale, redemption or early prepayment of a Treasury Bill or money market security at a lower interest rate.

USL may lose money by investing in government money market funds.

USL may potentially lose money by investing in government money market funds.

USL invests in government money market funds.

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Depending on how policies are formulated and applied, they could have the potential to negatively affect USL’s investment returns and make oil and natural gas products more expensive or less competitive.

USCF is the subject of class action litigation.

USCF is the subject of class action, derivative and other litigation.

In light of the inherent uncertainties involved in litigation matters, an adverse outcome in this litigation could materially adversely affect USCF’s financial condition.

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In light of the inherent uncertainties involved in such matters, an adverse outcome in this litigation could materially adversely affect USCF’s financial condition, results of operations or cash flows in any particular reporting period.

In addition, litigation could result in substantial costs and divert USCF's management's attention and resources from conducting USCF's operations, including the management of USL and the Related Public Funds.

In addition, litigation could result in substantial costs and divert USCF’s management’s attention and resources from conducting USCF’s operations, including the management of USL and the other Related Public Funds.

For more information, see “Item 3.

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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 1A. Risk Factors