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Item 1A. Risk Factors

2021-02-26 compared with 2020-02-21 · 250 added, 145 removed, 258 unchanged (60% of the section changed)

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The following risk factors should be read in connection with the other information included in this annual report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations and USO’s financial statements and the related notes.

USO’s investment objective is for the daily percentage changes in the NAV per share to reflect the daily percentage changes of the spot price of light, sweet crude oil, as measured by the daily percentage changes in the price of the Benchmark Oil Futures Contract, plus interest earned on USO’s collateral holdings, less USO’s expenses.

USO’s investment objective is for the daily percentage changes in the NAV per share to reflect the daily percentage changes of the spot price of light, sweet crude oil, as measured by the daily percentage changes in the price of Benchmark Oil Futures Contract, plus interest earned on USO’s collateral holdings, less USO’s expenses.

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

USO’s investment strategy is designed to provide investors with a cost-effective way to invest indirectly in crude oil and to hedge against movements in the spot price of light, sweet crude oil.

An investment in USO involves investment risk similar to a direct investment in Oil Futures Contracts and Other Oil-Related Investments, and correlation risk, or the risk that investors purchasing shares to hedge against movements in the price of crude oil will have an efficient hedge only if the price they pay for their shares closely correlates with the price of crude oil.

As a result of market conditions and regulatory limitations arising during the COVID-19 pandemic and the state of the crude oil markets, including significant market volatility, large numbers of USO shares purchased during a short period of time, and applicable regulatory accountability levels and position limits on oil futures contracts and risk mitigation measures that were imposed on USO in 2020, USO has invested in Oil Futures Contracts in months other than the Benchmark Oil Futures Contract.

The foregoing has impacted the performance of USO and its ability meet its investment objective, including that USO has not been able to meet its investment objective as favorably as it has in the past.

USO’s limited ability to invest in the Benchmark Oil Futures Contract and its need to investment in other Oil Futures Contracts is intended to be temporary but may continue indefinitely if the aforementioned market and regulatory conditions do not abate.

An investment in USO involves investment risk similar to a direct investment in Oil Futures Contracts and Other Oil-Related Investments but it is not a proxy for investing in the oil markets.

Investing in USO also involves correlation risk, or the risk that investors purchasing shares to hedge against movements in the price of crude oil will have an efficient hedge only if the price they pay for their shares closely correlates with the price of crude oil.

In addition to investment risk and correlation risk, an investment in USO involves tax risks, OTC risks, and other risks.

Investment Risk

The NAV of USO’s shares relates directly to the value of the Benchmark Oil Futures Contract and other assets held by USO and fluctuations in the prices of these assets could materially adversely affect an investment in USO’s shares.

The NAV of USO’s shares relates directly to the value of the Benchmark Oil Futures Contracts and other assets held by USO and fluctuations in the prices of these assets could materially adversely affect an investment in USO’s shares.

Past performance is not necessarily indicative of future results;

all or substantially all of an investment in USO could be lost.

The net assets of USO consist primarily of investments in Oil Futures Contracts and, to a lesser extent, in Other Oil-Related Investments.

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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, 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 that impair the functioning of financial markets and institutions also may adversely impact the demand for 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, 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.

Other crude oil demand-related factors.

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

Changes to U.S.

tariff and import/export regulations may have a negative effect on USO’s developments.

There has been ongoing discussion and commentary regarding potential significant changes to U.S.

trade policies, treaties and tariffs.

The current U.S.

presidential administration, along with the U.S.

Congress, has created significant uncertainty about the future relationship between the United States and other countries with respect to trade policies, treaties and tariffs.

These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global crude oil, generally.

Any of these factors could depress economic activity and could have a material adverse effect on USO’s business, financial condition and results of operations, which in turn would negatively impact USO and its shareholders.

Uncertainty about presidential administration initiatives could negatively impact USO’s business, financial condition and results of operations.

The current presidential administration has called for significant changes to U.S.

trade, healthcare, immigration, foreign and government regulatory policy.

Accordingly, there is significant uncertainty with respect to legislation, regulation and government policy at the federal level, as well as the state and local levels.

Recent events have created heightened uncertainty and introduced new and difficult-to-quantify macroeconomic and political risks.

There has been a corresponding increase in the uncertainty surrounding interest rates, inflation, foreign exchange rates, trade volumes and fiscal and monetary policy.

To the extent the U.S.

Congress or the current presidential administration implements changes to U.S.

policy, those changes may impact, among other things, the U.S.

and global economy, international trade and relations, unemployment, immigration, corporate taxes, healthcare, the U.S.

regulatory environment, inflation, supply and demand for commodities (including crude oil), and other areas.

Although USO cannot predict the impact, if any, of these changes to USO’s business, they could adversely affect USO’s business, financial condition, operating results and cash flows.

Economic impacts due to Brexit .

In June 2016, the United Kingdom held a referendum in which voters approved an exit from the European Union (“Brexit”) and, subsequently, on March 29, 2017, the U.K.

government began the formal process of leaving the European Union.

Brexit created political and economic uncertainty and instability in the global markets (including currency and credit markets), and especially in the United Kingdom and the European Union.

Because the U.K.

Parliament rejected Prime Minister Theresa May’s proposed Brexit deal with the European Union in January 2019 and March 2019, and Prime Minister Theresa May’s resignation which was effective June 7, 2019, there was increased uncertainty on the timing of Brexit.

However, under current Prime Minister Boris Johnson, the House of Commons passed a Brexit deal on December 20, 2019 and the U.K.

formally left the European Union on January 31, 2020.

is currently in a transition period until December 31, 2020, where agreements surrounding trade and other aspects of the U.K.’s future relationship with the European Union will need to be finalized.

The resulting political and economic uncertainty and instability in the United Kingdom has also impacted the European Union, generally, as well as the global economy.

In addition, the fiscal and monetary policies of foreign nations, such as Russia and China, may have a severe impact on the worldwide and U.S.

commodity markets.

Such disruptions or changes could adversely impact the value of USO’s crude oil investments.

Because USCF anticipates it will “roll” USO’s positions in Oil Interests, it may be subject to the potential negative impact from rolling futures positions.

USCF anticipates it will “roll” USO’s positions in Oil Interests and, as a result, is subject to risks related to rolling.

The contractual obligations of a buyer or seller holding a futures contract to expiration may generally be satisfied by settling in cash as designated in the contract specifications.

Alternatively, futures contracts may be closed out prior to expiration by making an offsetting sale or purchase of an identical futures contract on the same or linked exchange before the designated date of settlement.

Once this date is reached, the futures contract “expires.” As the futures contracts held by USO near expiration, they are generally closed out and replaced by contracts with a later expiration.

This process is referred to as “rolling.” USO does not intend to hold futures contracts through expiration, but instead to “roll” its positions.

When the market for these contracts is such that the prices are higher in the more distant delivery months than in the nearer delivery months, the sale during the course of the “rolling process” of the more nearby contract would take place at a price that is lower than the price of the more distant contract.

This pattern of higher futures prices for longer expiration futures contracts is often referred to as “contango.” Alternatively, when the market for these contracts is such that the prices are higher in the nearer months than in the more distant months, the sale during the course of the “rolling process” of the more nearby contract would take place at a price that is higher than the price of the more distant contract.

This pattern of higher futures prices for shorter expiration futures contracts is referred to as “backwardation.”

The presence of contango in certain futures contracts at the time of rolling would be expected to adversely affect USO’s long positions, and positively affect USO’s short positions.

Similarly, the presence of backwardation in certain futures contracts at the time of rolling such contracts would be expected to adversely affect USO’s short positions and positively affect USO’s long positions.

There have been extended periods in which contango or backwardation has existed in the futures contract markets for various types of futures contracts, and such periods can be expected to occur in the future.

These extended periods have in the past and can in the future cause significant losses for USO, and the periods can have as much or more impact over time than movements in the level of USO’s Benchmark Oil Futures Contract.

In 2020, in the context of the COVID-19 pandemic and disputes among oil-producing countries regarding potential limits on the production of crude oil, significant market volatility occurred and is continuing 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 USO had been fully invested in that contract during this time, USO’s per share NAV would have fallen below zero.

COVID-19 and other infectious disease outbreaks could negatively affect the valuation and performance of USO’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 has now been detected globally.

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

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 increasingly 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 Contract, and Other Oil-Related Interests.

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 USO.

Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally.

The duration of the COVID-19 outbreak and its ultimate impact on USO 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 USO’s ability to maintain operational standards (such as with respect to satisfying redemption requests), disrupt the operations of USO’s service providers, adversely affect the value and liquidity of USO’s investments, and negatively impact USO’s performance and your investment in USO.

The extent to which COVID-19 will affect USO and USO’s service providers and portfolio investments will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions taken to contain COVID-19.

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

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

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

Variables such as drought, floods, weather, 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, 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 USO’s investments to greater volatility than investments in traditional securities.

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

Historical performance of USO and the Benchmark Futures Contract is not indicative of future performance.

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

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

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Correlation Risk

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

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 USO’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 price of the Benchmark Oil Futures Contract.

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

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

● Daily percentage changes in the price 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, disputes among oil-producing companies over the potential limits on the production of crude oil, a corresponding collapse in demand for crude oil and a lack of on-land storage for crude oil.

These events have severely limited and continue to severely limit USO's ability to have a substantial portion of its assets invested in the Benchmark Oil Futures Contract and the ICE WTI Contract.

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

Also, if determined to be appropriate in light of market conditions, regulatory requirements, and risk mitigation measures imposed by FCMs, USO may need to invest in Other Oil Related Interests and hold significant portions of its portfolio in cash beyond what is has held in the past.

In addition to disclosing USO's end of day portfolio of investments, USO's investment intentions with respect to the type and percentage of investments in USO's portfolio will be disclosed on its website, www.uscfinvestments.com.

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

USO’s NAV per share will change throughout the day as fluctuations occur in the market value of USO’s portfolio investments.

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.

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 the light, sweet crude oil and the Benchmark Oil Futures Contract at any point in time.

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 USO by Authorized Participants in Redemption Baskets.

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

The NAV of USO’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.

For example, a shortage of USO's shares in the market and other factors could cause USO’s shares to trade at a premium.

Investors should be aware that such premiums can be transitory.

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 USO 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 USO 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.

For example, a shortage of USO shares in the market and other factors could cause USO's shares to trade at a premium.

Investors should be aware that such premiums can be transitory.

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 USO’s shares may also be influenced by non-concurrent trading hours between the NYSE Arca and the various futures exchanges on which light, sweet crude oil is traded.

While the shares trade on the NYSE Arca from 9:30 a.m.

Eastern Time, the trading hours for the futures exchanges on which sweet, light crude oil trade may not necessarily coincide during all of this time.

Eastern Time, the trading hours for the futures exchanges on which light, sweet crude oil trades may not necessarily coincide during all of this time.

For example, while the shares trade on the NYSE Arca until 4:00 p.m.

Eastern Time, liquidity in the global light, sweet crude market will be reduced after the close of the NYMEX at 2:30 p.m.

Eastern Time, liquidity in the global light, sweet crude oil market may be reduced after the determination of the settlement price by the NYMEX at 2:30 p.m.

Eastern Time.

As a result, during periods when the NYSE Arca is open and the futures exchanges on which sweet, light crude oil is traded are closed, trading spreads and the resulting premium or discount on the shares may widen and, therefore, increase the difference between the price of the shares and the NAV of the shares.

Daily percentage changes in USO’s NAV may not correlate with daily percentage changes in the price of the Benchmark Oil Futures Contract.

USO's NAV is calculated

based on the settlement price of Oil Futures Contracts at 2:30 p.m.

Eastern Time and the closing share price of USO on the NYSE Arca takes into account changes in the price of Oil Futures Contracts that occur after the settlement price is determined.

As a result, during periods when the NYSE Arca is open and the futures exchanges on which light, sweet crude oil is traded are closed, trading spreads and the resulting premium or discount on the shares may widen and, therefore, increase the difference between the price of the shares and the NAV of the shares.

Daily percentage changes in USO’s NAV may not correlate with daily percentage changes in the price of the Benchmark Oil Futures Contracts.

It is possible that the daily percentage changes in USO’s NAV per share may not closely correlate to daily percentage changes in the price of the Benchmark Oil Futures Contract.

Non-correlation may be attributable to disruptions in the market for light, sweet crude oil, the imposition of position or accountability limits by regulators or exchanges, or other extraordinary circumstances.

As USO approaches or reaches position limits with respect to the Benchmark Oil Futures Contract and other Oil Futures Contracts or in view of market conditions, USO may begin investing in Other Oil-Related Investments.

In addition, USO is not able to replicate exactly the changes in the price of the Benchmark Oil Futures Contract because the total return generated by USO is reduced by expenses and transaction costs, including those incurred in connection with USO’s trading activities, and increased by interest income from USO’s holdings of Treasury securities.

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

As a result of these market conditions and the regulatory response, large numbers of USO shares that were purchased during a short period of time, and regulatory accountability levels and position limits on oil futures contracts that were imposed on USO, USO invested in Oil Futures Contracts in months other than the Benchmark Oil Futures Contracts.

The foregoing impacted the performance of USO and made it difficult for USO to meet its investment objective, which is for the daily percentage changes in the NAV per share to reflect the daily percentage changes of the spot price of light, sweet crude oil, as measured by the daily percentage changes in the price of Benchmark Oil Futures Contract, plus interest earned on USO’s collateral holdings, less USO's expenses.

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

Daily percentage changes in the price of the Benchmark Oil Futures Contract may not correlate with daily percentage changes in the spot price of light, sweet crude oil.

The correlation between changes in prices of the Benchmark Oil Futures Contract 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 oil market, supply of and demand for Oil Futures Contracts (including the Benchmark Oil Futures Contract) and Other Oil-Related Investments, and technical influences in oil futures trading.

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

An investment in USO is not a proxy for investing in the oil markets.

To the extent that investors use USO as a means of indirectly investing in crude oil, there is the risk that the daily changes in the price of USO’s shares on the NYSE Arca, on a percentage basis, will not closely track the daily changes in the spot price of light, sweet crude oil on a percentage basis.

This could happen if the price of shares traded on the NYSE Arca does not correlate closely with the value of USO’s NAV;

the changes in USO’s NAV do not correlate closely with the changes in the price of the Benchmark Oil Futures Contract;

or the changes in the price of the Benchmark Oil Futures Contract do not closely correlate with the changes in the cash or spot price of crude oil.

This is a risk because if these correlations do not exist, then investors may not be able to use USO as a cost-effective way to indirectly invest in crude oil or as a hedge against the risk of loss in crude oil-related transactions.

The degree of correlation among USO’s share price, the price of the Benchmark Oil Futures Contract and the spot price of crude oil depends upon circumstances such as variations in the speculative oil market, supply of and demand for Oil Futures Contracts (including the Benchmark Oil Futures Contract) and Other Oil-Related Investments, and technical influences on trading oil futures contracts.

Investors who are not experienced in investing in oil futures contracts or the factors that influence that market or speculative trading in the crude oil markets and may not have the background or ready access to the types of information that investors familiar with these markets may have and, as a result, may be at greater risk of incurring losses from trading in USO shares than such other investors with such experience and resources.

Natural forces in the oil futures market known as “backwardation” and “contango” may increase USO’s tracking error and/or negatively impact total return.

The design of USO’s Benchmark Oil Futures Contract is such that every month it begins by using the near month contract to expire until the near month contract is within two weeks of expiration, when, over a four day period, it transitions to the next month contract to expire as its benchmark contract and keeps that contract as its benchmark until it becomes the near month contract and close to expiration.

In the event of a crude oil futures market where near month contracts trade at a higher price than next month to expire contracts, a situation described as “backwardation” in the futures market, then absent the impact of the overall movement in crude oil prices the value of the benchmark contract would tend to rise as it approaches expiration.

Conversely, in the event of a crude oil futures market where near month contracts trade at a lower price than next month contracts, a situation described as “contango” in the futures market, then absent the impact of the overall movement in crude oil prices the value of the benchmark contract would tend to decline as it approaches expiration.

The design of USO's Benchmark Oil Futures Contract is such that every month it begins by using the near month contract to expire until the near month contract is within two weeks of expiration, when, over a ten day period, it transitions to the next month contract to expire as its benchmark contract and keeps that contract as its benchmark until it becomes the near month contract and close to expiration.

In the event of a crude oil futures market where near month contracts trade at a higher price than next month to expire contracts, a situation described as "backwardation"

in the futures market, then absent the impact of the overall movement in light, sweet crude oil prices the value of the benchmark contract would tend to rise as it approaches expiration.

Conversely, in the event of a crude oil futures market

where near month contracts trade at a lower price than next month contracts, a situation described as "contango"

in the futures market, then absent the impact of the overall movement in crude oil prices the value of the benchmark contract would tend to decline as it approaches expiration.

While contango and backwardation are consistently present in trading in the futures markets, such conditions can be exacerbated by market forces.

For example, extraordinary market conditions in the crude oil markets, including "super contango"

(a higher level of contango arising from the overabundance of oil being produced and the limited availability of storage for such excess supply), occurred, and may continue to occur for an unknown duration, in the crude oil futures markets due to over-supply of crude oil in the face of weak demand during the COVID-19 pandemic when disputes among oil-producing countries regarding limitations on the production of oil also were occurring.

As a result of market and regulatory conditions, including significant market volatility, large numbers of USO shares purchased during a short period of time, and applicable regulatory accountability levels and position limits on oil futures contracts that were imposed on USO, USO invested in Oil Futures Contracts with expiration dates for months later than that of the Benchmark Futures Contract.

Continued holdings in these later month contracts will typically cause USO to experience lesser effects from contango and backwardation than would be the case if USO's holdings were primarily in oil futures contracts in the first month or second month.

When compared to total return of other price indices, such as the spot price of crude oil, the impact of backwardation and contango may cause the total return of USO's per share NAV to vary significantly.

Moreover, absent the impact of rising or falling oil prices, a prolonged period of contango could have a significant negative impact on USO's per share NAV and total return and investors could lose part or all of their investment.

See “ Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations ” in this annual report on Form 10-K for a discussion of the potential effects of contango and backwardation.

Accountability levels, position limits, and daily price fluctuation limits set by the exchanges have the potential to cause tracking error, which could cause the price of shares to substantially vary from the price of the Benchmark Oil Futures Contract.

See "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations"

in this annual report on Form 10-K for a discussion of the potential effects of contango and backwardation.

Accountability levels, position limits, and daily price fluctuation limits set by the exchanges have the potential to cause tracking error, by limiting USO's investments, including its ability to fully invest in the Benchmark Oil Futures Contract, which could cause the price of shares to substantially vary from the price of the Benchmark Oil Futures Contracts.

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

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

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

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

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

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

As discussed above, the CFTC has proposed to adopt limits on speculative positions in 25 physical commodity futures and option contracts as well as swaps that are economically equivalent to such contracts in the agriculture, energy and metals markets.

The Position Limit Rules would, among other things:

identify which contracts are subject to speculative position limits;

set thresholds that restrict the size of speculative positions that a person may hold in the spot month, other individual months, and all months combined;

create an exemption for positions that constitute bona fide hedging transactions;

impose responsibilities on DCMs and SEFs to establish position limits or, in some cases, position accountability rules;

and apply to both futures and swaps across four relevant venues:

OTC, DCMs, SEFs as well as certain non-U.S.

located platforms.

The CFTC’s first attempt at finalizing the Position Limit Rules, in 2011, was successfully challenged by market participants in 2012 and, since then, the CFTC has re-proposed them and solicited comments from market participants multiple times.

At this time, it is unclear how the Position Limit Rules may affect USO, but the effect may be substantial and adverse.

By way of example, the Position Limit Rules may negatively impact the ability of USO to meet its investment objectives through limits that may inhibit USCF’s ability to sell additional Creation Baskets of USO.

See "The Commodity Interest Markets-Commodities Regulation"

in this annual report on Form 10-K for additional information.

Until such time as the Position Limit Rules are adopted, the regulatory architecture in effect prior to the adoption of the Position Limit Rules will govern transactions in commodities and related derivatives.

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

As a result, USO may be limited with respect to the size of its investments in any commodities subject to these limits.

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

The Aggregation Rules will also apply with respect to the Position Limit Rules if and when such Position Limit Rules are adopted.

All of these limits may potentially cause a tracking error between the price of USO’s shares and the price of the Benchmark Oil Futures Contract.

This may in turn prevent investors from being able to effectively use USO as a way to hedge against crude oil-related losses or as a way to indirectly invest in crude oil.

USO has not limited the size of its offering and is committed to utilizing substantially all of its proceeds to purchase Oil Futures Contracts and Other Oil-Related Investments.

If USO 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 USO 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 USO’s shares and the price of the Benchmark Oil Futures Contract.

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

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

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

In addition, the ICE Futures Europe maintains the same accountability levels, position limits and monitoring authority for its light, sweet crude oil contract as the NYMEX.

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

If deemed necessary by the NYMEX and/or ICE Futures Europe, USO could be ordered to reduce or maintain the level of its futures contracts traded on such exchanges to below the 10,000 single month and/or 20,000 all month accountability level.

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

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

As of the date of this annual report on Form 10-K, circumstances had occurred that caused the NYMEX to impose new accountability levels and position limits.

As discussed above, the COVID-19 pandemic, disputes among oil-producing countries regarding potential limits on the production of crude oil, a corresponding collapse in demand for crude oil, a lack of on-land storage for crude oil, significant market volatility occurred and is continuing in the crude oil markets as well as the oil futures markets.

As a result, several factors including these market conditions, resulted in the purchase from USO of large numbers of its shares during a relatively short period of

time which in turn caused USO to invest the proceeds from such sales in the Benchmark Oil Futures Contract and certain of the other Oil Futures Contracts of the same month such as the cash-settled, but substantially similar, oil futures contract traded on ICE Futures (the “ICE WTI Contract”).

In the midst of the foregoing factors, continued market volatility and the increasing and relatively large size of USO’s positions in the foregoing contracts, the NYMEX imposed accountability levels and position limits on USO in two stages.

More specifically, USCF received letters from the CME on behalf of the NYMEX 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, USO and the Related Public Funds advised by USCF not to exceed accountability levels in the light sweet crude oil futures contract for June 2020 in excess of 10,000 futures contracts.

In addition, the April 16 CME Letter provided that USCF, USO and the Related Public Funds could not assume a position in light sweet crude oil futures contract for June 2020 in excess of the established position limit of 150,000 long futures contracts.

The April 23 CME Letter ordered USCF, USO 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.

USCF, USO and the Related Public Funds did not exceed those position limits and maintained positions that were below the position limits as required by the April 23 CME Letter.

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

Investors should note that the foregoing accountability levels and position limits are subject to change, which in turn could change the amount and type of permitted investments in which USO invests.

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

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

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

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

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

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

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

Other than for the legacy agricultural contracts, compliance with the limits imposed by the Position Limits Rule will not be required until 2022, except that economically equivalent swaps need not comply with the Position Limits Rule until 2023.The Benchmark Futures Contract will be subject to position limits under the Position Limits Rule, and UNG’s trading does not qualify as an enumerated bona fide hedge.

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

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

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

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

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

USO’s FCMs have imposed and may impose limits on the positions that USO may hold in the Benchmark Futures Contracts as well as certain other months that constrain USO’s ability to invest in the Benchmark Oil Futures Contract and other Oil Futures Contracts.

In particular, RBC expressly informed USO that it may not hold positions in the June Benchmark Oil Futures Contract expiring on May 19, 2020.

At the time it imposed this restriction, RBC continued to trade and clear other Oil Futures Contracts for USO, including in connection with rolls and rebalances of its portfolio.

At that time, RBC advised USO that, going forward, it may only purchase additional Benchmark Oil Futures Contracts and other Oil Futures Contracts through RBC for rolls and rebalances of USO’s portfolio and not as investments for the proceeds of new Creation Baskets.

The limits imposed by RBC on holdings in USO’s portfolio applied regardless

of whether the Oil Futures Contracts purchased would be within the accountability levels and position limits permitted by NYMEX and ICE.

RBC has since informed USO that USO may resume repurchasing Oil Futures Contracts for investment of the proceeds from Creation Baskets.

USO entered into an agreement with each of RCG, MCM and MFUSA on May 28, 2020, June 5, 2020 and December 3, 2020, respectively, to become an additional FCMs for USO.

Neither RCG, MCM nor MFUSA has precluded USO from purchasing, holding, or reinvesting the proceeds from the purchases of Creation Baskets in Oil Futures Contracts, including the Benchmark Oil Futures Contract.

However, limits could be imposed by any FCMs that, coupled with the risk measures already taken by RBC, would continue to limit USO's ability to have a substantial portion of its assets invested in the Benchmark Oil Futures Contract.

USO cannot predict with any certainty when and whether RBC will remove its limitations on holding certain positions in Oil Futures Contracts, or whether, or to what extent, any such limits may be imposed by any other FCM in the future.

USO is in ongoing discussions with other FCMs and it cannot predict when it will enter into such agreements.

The risk mitigation measures imposed to date by FCMs and other market participants have severely limited USO’s current ability to have a substantial portion of its assets invested in the Benchmark Oil Futures Contract and other Oil Futures Contracts.

Accordingly, and because such factors have continued to evolve, USO has had to invest in other Oil Futures Contracts and has had to more frequently rebalance and adjust the types of holdings in its portfolio than in the past.

The foregoing will continue to inhibit USO from pursuing its investment objective in the same manner.

In addition, when offering Creation Baskets for purchase, limitations imposed by the exchanges and any FCMs could limit USO’s ability to invest the proceeds of the purchases of Creation Baskets in Benchmark Oil Futures Contracts and other Oil Futures Contracts.

If this were the case, when selling Creation Baskets, USO may invest in other permitted investments, including Other Oil-Related Interests, and may hold larger amounts of Treasuries, cash and cash equivalents, which will further impair USO’s ability to meet its investment objective.

An investor’s tax liability may exceed the amount of distributions, if any, 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 for taxable periods beginning after December 31, 2017, USO could be liable for U.S.

Federal income tax, if the U.S.

Internal Revenue Service (“IRS”) does not accept the assumptions and conventions applied by USO in allocating those items, with potential adverse consequences for an investor.

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

federal income tax, if the IRS does not accept the assumptions and conventions applied by USO 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 USO is in many respects uncertain.

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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 USO’s allocation methods and require USO to reallocate items of income, gain, deduction, loss or credit in a manner that adversely affects investors.

If this occurs, investors may be required to file an amended tax return and to pay additional taxes plus deficiency interest.

In addition, for periods beginning after December 31, 2017, USO may be liable for U.S.

USO 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.

any investor.

If USO is required to pay any U.S.

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

The resulting tax liability on an investor of taking the adjustment into account in the year in which the Adjusted K-1 is issued may be less favorable to the investor than if the adjustment were taken into account in the reviewed year.

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

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federal tax system in a variety of ways, including significant changes to the taxation of business entities, the deductibility of interest expense, and the tax treatment of capital investment.

We cannot predict with certainty how any changes in the tax laws might affect the U.S.

We cannot predict with certainty how any

changes in the tax laws might affect the U.S.

economy or the demand for and the price of commodities.

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

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

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

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

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

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

In general, valuing OTC derivatives is less certain than valuing actively traded financial instruments such as exchange traded futures contracts and securities or cleared swaps because the price and terms on which such OTC derivatives are entered into or can be terminated are individually negotiated, and those prices and terms may not reflect the best price or terms available from other sources.

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

USO is not leveraged.

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

Consistent with the foregoing, USO's announced investment intentions, and any changes thereto, will take into account the need for USO 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, USO becoming leveraged.

If market conditions require it, these risk reduction procedures, including changes to USO's investments, may occur on short notice if they occur other than during a roll or rebalance period.

USO may temporarily limit the offering of Creation Baskets.

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

USO will announce to the market through the filing of a Current Report on Form 8-K if it intends to limit the offering of Creation Baskets at any time.

In such case, orders for Creation Baskets will be considered for acceptance in the order they are received by USO and USO would continue to accept requests for redemption of its shares from Authorized Participants through Redemption Baskets during the period of the limited offering of Creation Baskets.

Certain of USO’s investments could be illiquid, which could cause large losses to investors at any time or from time to time.

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In addition, even if collateral is used to reduce counterparty credit risk, sudden changes in the value of OTC transactions may leave a party open to financial risk due to a counterparty default since the collateral held may not cover a party’s exposure on the transaction in such situations.

USO is not actively managed and tracks the Benchmark Oil Futures Contract during periods in which the price of the Benchmark Oil Futures Contract is flat or declining as well as when the price is rising.

USO is not actively managed and its investment objective is to track the Benchmark Oil Futures Contracts so that the average daily percentage change in USO'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.

USO is not actively managed by conventional methods.

Accordingly, if USO’s investments in Oil Interests are declining in value, USO 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 futures positions in connection with the monthly change in the Benchmark Oil Futures Contract.

Accordingly, if USO’s investments in Oil Interests are declining in value, in the ordinary course, USO will not close out such positions (i) 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, (ii) in connection with the monthly change in the Benchmark Oil Futures Contract, or (iii) when USO otherwise determines it would be appropriate to do so, e.g., due to regulatory requirements or risk mitigation measures, or to avoid USO 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 USO’s shares to track the Benchmark Oil Futures Contract during periods in which its price is flat or declining as well as when the price is rising.

Although USO has always had the ability to invest in Oil Futures Contracts beyond the Benchmark Oil Futures Contract and in Other Oil-Related Investments, USO announced its intention to invest in Oil Futures Contracts other than the Benchmark Oil Future 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 Form 10-K, it is likely that the factors limiting USO'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 that USO's need to invest in other Oil Futures Contracts and, potentially other permitted investments, will continue.

USO'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 regulator accountability levels and position limits imposed on USO with respect to its investment in Oil Futures Contracts, additional or different risk mitigation measures taken by market participants, generally, including USO, with respect to USO acquiring additional Oil Futures Contracts, or USO 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, USO intends to buy or sell its permitted investments when USO increases or decreases either its portfolio overall or its holdings of particular investments.

USO has disclosed the parameters for making decisions regarding the permitted investments USO will hold, including the intended order of priority in selecting investments and the type of investments to be held in its portfolio.

As of May 1, 2020, the type and percentages of investments to be held by USO at the end of the monthly roll period as well as going forward, including for any rebalances, is published on its website www.uscfinvestments.com.

Commencing with the monthly roll occurring in May 2020, USO's positions in Oil Futures Contracts and Other Oil Related Investments roll over a ten-day period, whereas previously USO's positions would roll over a four-day period.

In addition, while determining the appropriate investments for USO's portfolio in accordance with its current intention, or to address the foregoing changes in market conditions, regulatory requirements or risk mitigation measures, USO may need to hold significant portions of its portfolio in cash beyond what it has historically held in order to satisfy potential margin requirements.

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

USO’s shares are listed for trading on the NYSE Arca under the market symbol "USO."

NYSE Arca may suspend USO’s shares from trading on the exchange with or without prior notice to USO, upon failure of USO to comply with the NYSE’s listing requirements, or when in its sole discretion, the NYSE Arca determines that such suspension of dealings is in the public interest or otherwise warranted.

There can be no assurance that the requirements necessary to maintain the listing of USO’s shares will continue to be met or will remain unchanged.

If USO were unable to meet the NYSE’s listing standards and were to become delisted, an investor’s ability to sell its shares would be adversely impacted.

The NYSE Arca may halt trading in USO’s shares, which would adversely impact an investor’s ability to sell shares.

USO’s shares are listed for trading on the NYSE Arca under the market symbol “USO.” Trading in shares may be halted due to market conditions or, in light of NYSE Arca rules and procedures, for reasons that, in the view of the NYSE Arca, make trading in shares inadvisable.

Trading in shares may be halted due to market conditions or, in light of NYSE Arca rules and procedures, for reasons that, in the view of the NYSE Arca, make trading in shares inadvisable.

For example, the NYSE ARCA recently halted trading in USO shares when USO first announced that it would also be investing in Oil Futures Contracts other than the Benchmark Futures Contract.

In addition, trading is subject to trading halts caused by extraordinary market volatility pursuant to “circuit breaker” rules that require trading to be halted for a specified period based on a specified market decline.

Additionally, there can be no assurance that the requirements necessary to maintain the listing of USO’s shares will continue to be met or will remain unchanged.

The liquidity of the shares may also be affected by the withdrawal from participation of Authorized Participants, which could adversely affect the market price of the shares.

The liquidity of USO's shares may also be affected by the withdrawal from participation of Authorized Participants, which could adversely affect the market price of the shares.

In the event that one or more Authorized Participants which have substantial interests in the shares withdraw from participation, the liquidity of the shares will likely decrease, which could adversely affect the market price of the shares and result in investors incurring a loss on their investment.

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 create or redeem Redemption Baskets.

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

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.

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

Although USO 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 USO 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 USO were to hold assets that have a value of less than zero.

USCF endeavors to have the value of USO's Treasuries, cash and cash equivalents, whether held by USO 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, USO 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, USO's announced investment intentions, and any changes thereto, will take into account the need for USO 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, USO 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.

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

The limited partners and shareholders take no part in the management or control, and have a minimal voice in USO's operations or business.

Limited partners and shareholders must therefore rely upon the duties and judgment of USCF to manage USO's affairs.

Limited partners and shareholders have no right to elect USCF on an annual or any other continuing basis.

If USCF voluntarily withdraws, however, the holders of a majority of USO's outstanding shares (excluding for purposes of such determination shares owned, if any, by the withdrawing general partner and its affiliates) may elect its successor.

USCF may not be removed as general partner except upon approval by the affirmative vote of the holders of at least 66 2/3 percent of USO's outstanding shares (excluding shares, if any, owned by USCF and its affiliates), subject to the satisfaction of certain conditions set forth in the LP Agreement.

Limited partners may have limited liability in certain circumstances, including potentially having liability for the return of wrongful distributions.

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

USCF’s Board of Directors currently consists of four Management Directors, each of whom are executive officers or employees of USCF, and three Non-Management Directors, each of whom are considered independent for purposes of applicable NYSE Arca and SEC rules.

USCF’s Board of Directors currently consists of four Management Directors, each of whom are also executive officers or employees of USCF, and three Non-Management Directors, each of whom are considered independent for purposes of applicable NYSE Arca and SEC rules.

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.

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USCF’s officers, directors and employees do not devote their time exclusively to USO and also are directors, officers or employees of other entities that may compete with USO for their services.

They could have a conflict between their responsibilities to USO and to those other entities.

They could have a conflict between their responsibilities to

USO and to those other entities.

As a result of these and other relationships, parties involved with USO have a financial incentive to act in a manner other than in the best interests of USO and the shareholders.

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Although USCF attempts to monitor these conflicts, it is extremely difficult, if not impossible, for USCF to ensure that these conflicts do not, in fact, result in adverse consequences to the shareholders.

USO may also be subject to certain conflicts with respect to the FCM, 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 FCM.

USCF serves as the general partner or sponsor to the Related Public Funds, including USO.

USCF may have a conflict to the extent that its trading decisions for USO may be influenced by the effect they would have on the other funds it manages.

By way of example, if, as a result of reaching position limits imposed by the NYMEX, USO purchased oil futures contracts, this decision could impact USO'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 Futures Contract.

USO 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.

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

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

In particular, unforeseen circumstances, including the death, adjudication of incompetence, bankruptcy, dissolution, or removal of USCF as the general partner of USO could cause USO 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.

In particular, unforeseen circumstances, including, but not limited to, (i) market conditions, regulatory requirements, risk mitigation measures taken by USO or third parties or otherwise that would lead USO to determine that it could no longer foreseeably meet its investment objective or that USO's aggregate net assets in relation to its operating expenses or its margin or collateral requirements make the continued operation of USO unreasonable or imprudent, or (ii) adjudication of incompetence, bankruptcy, dissolution, withdrawal, or removal of USCF as the general partner of USO could cause USO 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 USCF to terminate USO.

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USO does not expect to make cash distributions.

USO has not previously made any cash distributions and intends to reinvest any realized gains in additional Oil Interests rather than distributing cash to limited partners.

USO has not previously made any cash distributions and intends to reinvest any realized gains in additional Oil Interests rather than distributing cash to limited partners, or other shareholders.

Therefore, unlike mutual funds, commodity pools or other investment pools that actively manage their investments in an attempt to realize income and gains from their investing activities and distribute such income and gains to their investors, USO generally does not expect to distribute cash to limited partners.

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

The Fund may potentially lose money on its holdings of money market mutual funds.

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

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

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

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

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

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

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

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

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

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

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

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

The failure or bankruptcy of a futures commission merchant or clearing house could result in a substantial loss of USO’s assets and could impair USO in its ability to execute trades.

The Commodity Exchange Act and CFTC regulations impose several requirements on FCMs and clearing houses that are designed to protect customers, including mandating the implementation of risk management programs, internal monitoring and controls, capital and liquidity standards, customer disclosures, and auditing and examination programs.

In particular, the Commodity Exchange Act and CFTC regulations require FCM and clearing houses to segregate all funds received from customers from proprietary assets.

There can be no assurance that the requirements imposed by the Commodity Exchange Act and CFTC regulations will prevent losses to, or not materially adversely affect, USO or its investors.

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

While USCF makes every effort to predict and maintain an adequate amount of shares outstanding, if a substantial number of requests for Creation Baskets are received by USO 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 and disputes among oil-producing countries regarding limits on the production of crude oil.

Among other things, such conditions could result in

circumstances where, because of high demand for its shares, USO 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 in the Spring of 2020 as a result of the COVID-19 pandemic and disputes among oil-producing countries.

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 USO would likely still continue to actively trade the shares.

However, in such a situation, Authorized Participants and other market makers may seek to adjust the market they make in the shares.

Specifically, such market participants may increase the spread between the prices that they quote for offers to buy and sell shares to allow them to adjust to the potential uncertainty as to when they might be able to purchase additional Creation Baskets of shares.

In addition, Authorized Participants may be less willing to offer to quote offers to buy or sell shares in large numbers.

The potential impact of either wider spreads between bid and offer prices, or reduced number of shares on which quotes may be available, could increase the trading costs to investors in USO compared to the quotes and the number of shares on which bids and offers are made if the Authorized Participants still were able to freely create new baskets of shares.

In addition, there could be a significant variation between the market price at which shares are traded and the shares’ NAV, which is also the price shares can be redeemed with USO by Authorized Participants in Redemption Baskets.

For example, USO suspended purchases of Creation Baskets in April 2020 as a result of the exhaustion of available SEC registered shares that could be issued by USO due to unexpected demand during the aforementioned market volatility arising from the COVID-19 pandemic and disputes among oil-producing countries.

At the time of this suspension, the market price of USO shares on April 21, 2020 was 36% higher than USO's reported end-of-day per share NAV.

A significant portion of this difference can be attributed to the fact that USO's NAV is calculated based on the settlement price of Oil Futures Contracts at 2:30 p.m.

New York Time, which is ninety (90) minutes earlier than the determination of the closing share price at 4:00 p.m.

New York Time.

The closing share price takes into account changes in the price of Oil Futures Contracts that occur after the settlement price is determined.

However, USO's suspension of purchases of Creation Baskets, record volatility that occurred in crude futures markets on April 20, 2020 and April 21, 2020, and record volume in USO share transactions on the NYSE on the same days also contributed to the premium on April, 21, 2020.

In addition, investors should be aware that such premiums can be transitory.

The high premium that occurred recently was short-lived and fell almost immediately, notwithstanding the suspension of sales of Creation Basket.

On April 22, 2020, the market price of USO shares fell to a level of 8.66% above the per share NAV, and, from April 23, 2020, continued its decline to 1.45% on May 1, 2020.

For the period beginning May 1, 2020 and ending May 29, 2020 the premium averaged 2.25%.

Any potential premium or impact to the market in shares of USO that could occur from the Authorized Participants' inability to purchase new Creation Baskets would likely not extend beyond the time when additional shares of USO would be registered and available for distribution.

USO may limit the offering of its Creation Baskets if it determines that it cannot reasonably reinvest the proceeds in a manner that meets its investment objective and satisfy regulatory requirements and risk mitigation measures.

USO may determine that USO will 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);

(2) market conditions (including but not limited to those allowing USO to obtain greater liquidity or to execute transactions with more favorable pricing);

and (3) risk mitigation measures taken by USO's current and other FCMs that limit USO and other market participants from investing in particular crude oil futures contracts, USO'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.

The failure or bankruptcy of a clearing broker or USO's Custodian could result in a substantial loss of USO’s assets and could impair USO in its ability to execute trades.

The CEA and CFTC regulations impose several requirements on FCMs and clearing houses that are designed to protect customers, including mandating the implementation of risk management programs, internal monitoring and controls, capital and liquidity standards, customer disclosures, and auditing and examination programs.

In particular, the CEA and CFTC regulations require FCMs and clearing houses to segregate all funds received from customers from proprietary assets.

There can be no assurance that the requirements imposed by the CEA and CFTC regulations will prevent losses to, or not materially adversely affect, USO or its investors.

In particular, in the event of an FCM’s or clearing house’s bankruptcy, USO could be limited to recovering either a pro rata share of all available funds segregated on behalf of the FCM’s combined customer accounts or USO may not recover any assets at all.

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This is because if such a bankruptcy were to occur, USO would be afforded the protections granted to customers of an FCM, and participants to transactions cleared through a clearing house, under the United States Bankruptcy Code and applicable CFTC regulations.

Such provisions generally provide for a pro rata distribution to customers of customer property held by the bankrupt FCM or an Exchange’s clearing house if the customer property held by the FCM or the Exchange’s clearing house is insufficient to satisfy all customer claims.

Bankruptcy of a clearing FCM can be caused by, among other things, the default of one of the FCM’s customers.

Such provisions generally provide for a pro rata distribution to customers of customer property held by the bankrupt FCMs or an exchange’s clearing house if the customer property held by the FCMs or the exchange’s clearing house is insufficient to satisfy all customer claims.

Bankruptcy of a clearing FCMs can be caused by, among other things, the default of one of the FCM’s customers.

In this event, the Exchange’s clearing house is permitted to use the entire amount of margin posted by USO (as well as margin posted by other customers of the FCM) to cover the amounts owed by the bankrupt FCM.

Consequently, USO could be unable to recover amounts due to it on its futures positions, including assets posted as margin, and could sustain substantial losses.

Notwithstanding that USO could sustain losses upon the failure or bankruptcy of its FCM, the majority of USO’s assets are held in Treasuries, cash and/or cash equivalents with the Custodian and would not be impacted by the bankruptcy of an FCM.

Notwithstanding that USO could sustain losses upon the failure or bankruptcy of its FCM, the majority of USO’s assets are held in Treasuries, cash and/or cash equivalents with USO's Custodian and would not be impacted by the bankruptcy of an FCM.

The failure or bankruptcy of USO’s Custodian could result in a substantial loss of USO’s assets.

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While USO has established business continuity plans, there are inherent limitations in such plans.

General Risk Factors

Changes to U.S.

tariff and import/export regulations could have a negative effect on USO.

There has been ongoing discussion and commentary regarding significant changes that have been and could be made to U.S.

trade policies, treaties and tariffs.

presidential administration and U.S.

Congress is in the process of revisiting and, in some cases, reversing changes made by the prior U.S.

presidential administration and there is uncertainty about the future relationship between the United States and other countries with respect to trade policies, treaties and tariffs.

These developments, or the perception that any

of them could occur, could have a material adverse effect on global economic conditions and the stability of global financial markets, and could significantly reduce global trade and, in particular, trade between the impacted nations and the United States.

Any of these factors could depress economic activity and negatively impact USO.

There is uncertainty surrounding potential legal, regulatory and policy changes by the new presidential administration in the United States that may directly affect financial institutions and the global economy.

As a result of the United States presidential election, which occurred on November 3, 2020 and subsequent senate runoff elections, there has been a change in control of the executive and legislative branches of the U.S.

Changes in federal policy, including tax policies, and at regulatory agencies occur over time through policy and personnel changes following elections, which lead to changes involving the level of oversight and regulation of the energy sector, climate change, and the financial services industry, as well as changes in tax rates.

The nature, timing and economic and political effects of potential changes to the current legal and regulatory framework affecting the energy sector and financial institutions remain highly uncertain.

Uncertainty surrounding future changes may adversely affect USO and its investments.

Unresolved Staff Comments.

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Not applicable.

Legal Proceedings.

Although USO may, from time to time, be involved in litigation arising out of its operations in the normal course of business or otherwise, USO is currently not a party to any pending material legal proceedings.

Mine Safety Disclosures.

Not applicable.

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