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Item 7. Management’s Discussion and Analysis

2025-02-28 compared with 2024-02-29 · 83 added, 109 removed, 368 unchanged (34% of the section changed)

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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.

USL, a Delaware limited partnership, is a commodity pool that issues shares that are traded 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.

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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.

As a result, investors should be aware that USL would meet its investment objective even if there are significant deviations between changes in its daily NAV and changes in the daily prices of the Benchmark Oil Futures Contracts, provided that the average daily percentage change in USL’s NAV over 30 successive valuation days is within plus/minus ten percent (10)% of the average daily percentage change in the prices 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 .

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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, risk mitigation measures, liquidity 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, and other petroleum-based fuels, Oil Futures Contracts and indices based on the foregoing (collectively, “Other Oil-Related Investments”).

and foreign exchanges (collectively, “Oil Futures Contracts”) and to a lesser extent, in order to comply with regulatory requirements, risk mitigation measures (including those that may be taken by USL, USL’s FCMs, counterparties or other market participants), liquidity 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 and 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 tracked the daily changes in spot prices of light, sweet crude oil.

USCF further believes that the daily changes in prices of the Benchmark Oil Futures Contracts have historically 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.

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Part 150 of the CFTC’s regulations (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 that all market participants must comply with, with certain exemptions.

Certain of the Benchmark Oil Futures Contracts are subject to position limits under the Position Limits Rule, and USL’s trading does not qualify for an exemption therefrom.

Certain of the Benchmark Futures Contracts are subject to position limits under the Position Limits Rule, and USL’s trading does not qualify for an exemption therefrom.

Accordingly, the Position Limits Rule could inhibit USL’s ability to invest in the relevant Benchmark Oil Futures Contracts and thereby could negatively impact the ability of USL to meet its investment objective.

USL has not limited the size of its offering and intends to utilize substantially all of its proceeds to purchase Oil Futures Contracts and Other Oil - Related Investments to the extent possible.

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.

Margin for OTC Swaps

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exchanges to be offered and sold in the United States.

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

An outbreak of infectious respiratory illness caused by a novel coronavirus known as COVID-19 was first detected in China in December 2019 and spread globally.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.

COVID-19 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 spread of COVID-19 had 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 were impacted by the outbreak and government and other measures seeking to contain its spread.

COVID-19 had 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 had a significant adverse effect on the prices of Oil Futures Contracts, including the Benchmark Oil Futures Contracts, and Other Oil-Related Contracts.

Infectious disease outbreaks like COVID-19 may arise in the future and 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 such an outbreak, including the potential for 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.

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

Infectious disease outbreaks like the COVID-19 pandemic may arise in the future and could adversely affect USL and, more generally, individual issuers and capital markets, in ways that cannot necessarily be foreseen.

For example, COVID-19 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 COVID-19 pandemic that occurred in 2020 had 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 were impacted by the outbreak and government and other measures seeking to contain COVID-19’s spread.

An infectious disease outbreak may arise in the future and could have the same or similar effects as the COVID-19 pandemic, or different effects that cannot be foreseen.

Moreover, as was the case with the COVID-19 pandemic, actions taken by government and quasi-governmental authorities and regulators throughout the world in response to an infectious disease outbreak, including the potential for 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.

Public health crises caused by infectious disease outbreaks may exacerbate other pre-existing political, social and economic risks in certain countries or globally and their duration cannot be determined with certainty.

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.

USL may be subject to interest rate risk, which may prevent USL from investing fully 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 the risk that fixed income securities and other investments in USL’s portfolio will fluctuate in value because of a change in interest rates.

Interest rate changes can be sudden and unpredictable, and USL may lose money because of movements in interest rates.

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

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

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.

In addition, in risk interest rate environments, it is possible that the Treasury Bills held by USL will decline in value.

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.

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The average price of the Benchmark Oil Futures Contracts started the year at $71.39 per barrel.

The high of the year was on September 27, 2023 when the average price reached $85.20 per barrel.

The average low for the year was on June 12, 2023, which was $66.31 per barrel.

The high of the year was on April 5, 2024 when the average price reached $82.01 per barrel.

The average low for the year was on September 10, 2024, which was $64.14 per barrel.

The year ended with the average price of the Benchmark Oil Futures Contracts at $69.70 per barrel, a decrease of approximately (2.37)% over the year.

USL’s per share NAV began the year at $35.45 and ended the year at $35.23 on December 31, 2023, decrease of approximately (0.62)% over the year.

The average Benchmark Oil Futures Contracts prices listed above began with the February 2023 to January 2024 contracts and ended with the December 2023 to January 2025 contracts.

The decrease of approximately (9.84)% 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.

USL’s per share NAV began the year at $35.23 and ended the year at $38.01 on December 31, 2024, increase of approximately 7.89% over the year.

The average Benchmark Oil Futures Contracts prices listed above began with the February 2022 to January 2023 contracts and ended with the February 2024 to January 2025 contracts.

The decrease of approximately (2.37)% on the average price of the Benchmark Oil Futures Contracts listed above is a hypothetical return only and would not actually be realized 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.

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Results of Operations.

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, 2023, USL had issued 53,000,000 shares, 1,900,000 of which were outstanding.

As of December 31, 2024, USL had 1,300,000 shares outstanding.

On April 28, 2023, the SEC declared effective a registration statement filed by USL that registered an unlimited number of shares.

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As of December 31, 2024, 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., RBC Capital Markets LLC, SG Americas Securities LLC, and Virtu Americas LLC.

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

For the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

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Total fees and other expenses excluding management fees

Fees and expenses related the registration or offering of additional shares

Total commissions accrued to brokers

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The fee is accrued daily and paid monthly.

The decrease in the per share NAV for the year ended December 31, 2023, compared to the year ended December 31, 2022, 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.

The increase in the per share NAV for the year ended December 31, 2024, compared to the year ended December 31, 2023, 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.

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, 2024, compared to the year ended December 31, 2023.

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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, 2023, compared to the year ended December 31, 2022, was due primarily to an decrease in professional fees.

The increase in total fees and other expenses excluding management fees for the year ended December 31, 2024, compared to the year ended December 31, 2023 was due primarily to an increase in professional fees.

The decrease in total commissions accrued to brokers for the year ended December 31, 2024, compared to the year ended December 31, 2023, was due primarily to a lower number of Oil Futures Contracts being held and traded.

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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 $36.05 as of December 31, 2024, for a total return over the relevant time period of 2.33%.

The difference between the actual per share NAV total return of USL of (0.62)% and the expected total return based on the Benchmark Oil Futures Contracts of (4.23)% was a difference over the time period of 3.61%, which is to say that USL’s actual total return outperformed its benchmark by that percentage.

The difference between

the actual per share NAV total return of USL of 7.89% and the expected total return based on the Benchmark Oil Futures Contracts of 2.33% was a difference over the time period of 5.56%, 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.

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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 the closing settlement price 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.

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

During the year ended December 31, 2024, 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.

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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.

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 average of the prices of the Benchmark Oil Futures Contracts.

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

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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, 2024, USL did not hold any Other Oil-Related Investments.

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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.

This is because 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.

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The average price of the Benchmark Oil Futures Contracts decreased (2.37)% from the end of 2023 through December 31, 2024 finishing the quarter at $69.70.

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 of 2020 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 of 2020 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 during 2020.

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 futures contracts with expiration dates in later months.

On a percentage basis, the difference in price between the front month WTI Oil Futures Contract and the second month WTI Oil Futures Contract was more than double the previous record.

This divergence caused the price of WTI Oil Futures Contracts with different expiration dates to move in different directions.

For example, the price of the front month WTI Oil Futures Contract and second month WTI 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 price of the front and second month WTI Oil Futures Contracts was (24)%, meaning that 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 in 2020.

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.

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 an average of $68.00 per barrel during calendar year 2021.

WTI crude oil inventories in the United States fell from a modern record of 541 mb in June 2020 to 418 mb by the end of the fourth quarter of 2021.

Crude oil production in the United States fell below 10 mbd twice in 2020 and once in early 2021 after peaking at 13.1 mbd in March of 2020.

production rose to 11.8 mbd by December 31, 2021.

Similarly, OPEC production declined from over 30 mbd pre-COVID-19 to a pandemic low of 22.5 mbd before gradually recovering to 28.1 mbd by December 31, 2021.

While the impact of the COVID-19 pandemic appears to have decreased, elevated risk remains in the oil markets until the current and future COVID-19 pandemic mitigation measures have fully subsided.

Bullish fundamentals for crude oil prices were in place when Russia invaded Ukraine in February of 2022, causing the United States and other countries and certain international organizations to impose broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response.

The war in Russia – Ukraine war, sanctions and the corresponding disruption in the supply of Russian oil, have resulted in significant volatility in the oil markets, particularly in early March when WTI crude oil briefly rose to over $123.70 per barrel on March 8, 2022 then fell back to $95.04 per barrel on March 16, 2022, before rising and the falling again to end the first quarter of 2022 at $100.28 per barrel.

A bullish trend for crude oil emerged from mid-April through early June 2022 when WTI crude oil again topped $120 per barrel before, once again, giving up gains to end the fourth quarter of 2022 at $80.26.

Crude oil prices struggled to find direction during the first half of 2023 with seventeen notable price reversals, most of which exceeded $5.

Prices rose dramatically in the third quarter, from approximately $70 to over $90.

This strong bull market completely reversed in the fourth quarter and by December crude had plunged back to the $70 to $75 range.

crude oil production growth accelerated in late July and rose until the end of the year, finally surpassing pre-pandemic levels and reaching a record of 13.3 mbd in December.

Global crude oil supply rose above demand during the fourth quarter of 2023.

Russia and OPEC have still not returned to pre-pandemic production levels.

OPEC has fiercely supported prices with voluntary cuts by and production quotas on member nations over the last several years.

However, the November 2023 OPEC meeting was tumultuous and left the market uncertain of the cartel's future commitment to cuts, despite an extension of voluntary cuts and expansion of collective curbs that amounted to 2.2 mbd until March 2024.

Looking ahead, if OPEC's strategic focus shifts from price support to market share defense, prices could come under further pressure.

Conversely, demand for crude oil has slowly increased since the onset of the pandemic in 2020.

According to the U.S.

Department of Energy, crude oil consumption reached an all-time high at the end of 2023 and is expected to continue increasing in 2024.

However, growth forecasts from the U.S.

Energy Information Administration (EIA) and the International Energy Agency (IEA) have declined from more optimistic projections earlier in 2023.

Nevertheless, ongoing demand growth during a time when OPEC continues to restrain supply could lead to stable or higher prices over time.

Supply constraints, worker shortages, infrastructure and manufacturing energy usage, the Russia-Ukraine war, the terror attacks by Hamas on Israel and ensuing conflict in the Middle East, and other geopolitical tensions, political unrest, and attacks or threats of attack by terrorists, are other factors that could contribute to future increases in crude oil prices.

Conversely, changes in OPEC policy, further non-OPEC production growth, and any sluggishness in the global economy could weigh on prices.

Geopolitical risk is expected to be particularly high in 2024.

The Russia-Ukraine war and Middle East conflict have the potential to create further supply disruptions and sanctions, which could lead to further volatility.

However, if a resolution to the conflicts were to occur, volatility could decrease and prices could decline somewhat in a short period of time.

Crude oil prices may also be highly reactive to developments as global buyers and sellers of crude reposition their relationships.

The early 2020’s witnessed extraordinary events in global financial markets, and crude oil offered no exception.

During the first half of 2020, simultaneous demand and supply shocks led to unparalleled risk and volatility in oil futures markets.

The oil demand shock was caused by the COVID-19 pandemic and the oil supply shock was caused by a Saudi-Russia price war.

These twin shocks, which had never occurred at the same time before, caused several unprecedented effects.

First, the front month WTI Oil Futures Contract traded at negative prices for the first and only time in history.

Crude oil hit an all-time closing low of $(37.63) on April 20, 2020.

Second, annualized volatility of front month WTI crude oil futures prices reached 984% in May 2020 after averaging 25% in the first two months of 2020 and 35% in 2019.

The volatility includes several record-breaking returns that occurred between March and May of 2020.

Third, WTI Oil Futures Contracts, which typically move together (i.e., increase or decrease) about 99% of the time, often moved in opposite directions, with daily correlation dropping to (24%).

Fourth, futures curves, which can exhibit conditions known as “contango” and “backwardation” (as discussed above), moved into an extreme formation that some market experts referred to as “super contango.” This was a result of extreme bearishness in spot prices, which saw the front month WTI Oil Futures Contract detach from the rest of the futures curve and fall to an extreme position relative to later dated futures contracts.

As economies reopened and OPEC+ supply cuts were absorbed by the market, WTI crude oil prices rose from all-time lows and conditions for a new bull market emerged.

Bullish fundamentals for crude oil prices were already in place when Russia invaded Ukraine in February of 2022.

The war led to another round of heightened volatility and higher prices.

Crude oil peaked in May 2022, then declined for the remainder of the year.

Since early 2023, crude oil prices have traded mostly between approximately $65 to $80, with several prominent price reversals.

In the fourth quarter of 2024, U.S.

crude oil production averaged 13.5 mbd.

production has risen since the height of the COVID-19 pandemic in 2020.

OPEC crude production has mostly declined since late 2022 as the cartel has supported prices with voluntary output cuts.

Globally, the U.S.

Energy Information Administration estimates that crude oil supply will slightly exceed demand in 2025 by 0.3 mbd, while the International Energy Agency expects a 0.7 mbd supply surplus.

Russia and OPEC have still not returned to pre-pandemic production levels, while the U.S.

has become the world’s largest crude oil producing nation and other oil producing nations have also increased their output.

OPEC has fiercely supported prices with voluntary cuts and production quotas over the last several years.

The cartel announced plans to begin unwinding voluntary cuts and increasing quotas in 2024, but delayed and made adjustments to these plans several times.

OPEC may continue to restrict production if conditions warrant.

However, pressure from the Trump administration may tip the scales in favor of those in the cartel who wish to increase production sooner than later.

If OPEC’s strategic focus shifts from price support to market share defense, prices could come under pressure.

Even if OPEC continues to postpone the unwinding of its cuts and voluntary quotas, any sluggishness in the global economy could weigh on prices.

In the U.S., the Trump administration has aggressively called for increased domestic production and its actions have and will make more drilling possible.

However, U.S.

drillers have shown restraint in recent years, and it is likely that ongoing growth in U.S.

production will continue along the same trajectory.

Technology, geology, and economics tend to be larger determinants of U.S.

production levels than political policy.

The current geopolitical situation adds complexity to the supply-demand equation.

While tensions in the Middle East seem to be abating, the region remains a flash point for risk to crude oil supply.

Likewise, the Russia-Ukraine war has the potential to create further supply disruptions and price volatility due to sanctions and disruptions.

Finally, tariffs and other global trade dynamics could curtail the free flow of supply, potentially increasing prices.

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

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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.

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 the daily changes in percentage terms in USL’s per share NAV correlate as closely as possible with daily changes in percentage terms in the averages of the prices 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.

As noted above, USCF also believes that the changes in percentage terms in the average of the prices 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, 2023 Compared to the Year Ended December 31, 2022

24 unchanged sentences

Although permitted to do so under its Limited Partnership Agreement, USL has not leveraged, and does not intend to leverage, its assets through borrowings or otherwise, and makes its investments accordingly.

Consistent with the foregoing, USL’s investment decisions will take into account the need for USL to maintain adequate liquidity to meet its margin and collateral requirements and to avoid, to the extent reasonably possible, USL becoming leveraged.

If the market conditions require it, these risk reduction procedures, including changes to USL’s investments, may occur on short notice.

Consistent with the foregoing, USL’s investments will take into account the need for USL to maintain adequate liquidity to meet its margin and collateral requirements and to avoid, to the extent reasonably possible, USL becoming leveraged.

If market conditions require it, these risk reduction procedures, including changes to USL’s investments, may occur on short notice.

USL does not and will not borrow money or use debt to satisfy its margin or collateral obligations in respect of its investments, but 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.

14 unchanged sentences

In particular, unforeseen circumstances, including, but not limited to, (i) market conditions, regulatory requirements, risk mitigation measures (including those that may be taken by USL, USL’s FCMs, counterparties or other market participants) that would lead USL to determine that it could no longer foreseeably meet its investment 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.

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

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

32 unchanged sentences

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.

However, since USLs 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.

3 unchanged sentences

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.

The latter are expenses not incurred in the ordinary course of USLs 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.

2 unchanged sentences

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.

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 USLs existence.

Either party may terminate these agreements earlier for certain reasons described in the agreements.

As of December 31, 2023, USL’s portfolio held 938 Crude Oil Futures CL Contracts traded on the NYMEX.

As of December 31, 2024, USLs portfolio held 709 Crude Oil Futures CL Contracts traded on the NYMEX.

As of December 31, 2024 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.

For a list of USLs 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