What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-02-25 compared with 2021-02-26 · 118 added, 119 removed, 389 unchanged (38% of the section changed)

4 unchanged sentences

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.

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.

As a result of market conditions and regulatory limitations arising during the COVID-19 pandemic and the state of the crude oil markets in general, including significant market volatility 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.

USO’s limited ability to invest in the Benchmark Oil Futures Contract and its need to invest in other Oil Futures Contracts as well as Other Oil-Related Investments, was originally intended to be temporary but may continue indefinitely.

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.

31 unchanged sentences

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

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.

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

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

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

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

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.

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 spread 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.

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

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.

5 unchanged sentences

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.

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

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

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

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

vaccination rates among the population;

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

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

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

11 unchanged sentences

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 Contracts is not indicative of future performance.

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

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

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

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

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

Correlation Risk

5 unchanged sentences

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.

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

Such events, together with the prospect that such events could reoccur, have significantly limited USO’s ability to have a substantial portion of its assets invested in the Benchmark Oil Futures Contract.

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

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

USO’s end of day portfolio of investments will be disclosed each day on its website, www.uscfinvestments .com.

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

1 unchanged sentence

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.

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

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

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

1 unchanged sentence

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.

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 Contracts at any point in time.

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.

5 unchanged sentences

Eastern Time.

USO's NAV is calculated

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

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.

3 unchanged sentences

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 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.

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 Oil Futures Contract and 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 Treasuries (defined below).

11 unchanged sentences

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.

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.

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 in the crude oil futures markets in 2020 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, in 2020 USO invested in, and continues to invest in, Oil Futures Contracts with expiration dates for months later than that of the Benchmark Oil Futures Contract.

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.

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.

10 unchanged sentences

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.

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

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

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.

As a result of continued market volatility resulting from, among other things, the COVID-19 pandemic, related supply chain disruptions, ongoing disputes among oil-producing countries and the relatively large size of USO’s positions in Benchmark Oil Futures 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”).

7 unchanged sentences

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”).

The Benchmark Oil Futures Contract will be subject to position limits under the Position Limits Rule, and USO’s trading does not qualify for an exemption therefrom.

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

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.

USO’s FCMs have imposed and may impose limits on the positions that USO may hold in the Benchmark Oil 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.

1 unchanged sentence

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.

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.

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 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.

However, limits could be imposed by any FCM 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.

The risk mitigation measures imposed by FCMs and other market participants have significantly limited USO’s 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.

The foregoing may inhibit USO from pursuing its investment objective in the same manner in the future.

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.

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.

14 unchanged sentences

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.

If USO is required to pay any U.S.

7 unchanged sentences

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

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

federal income tax purposes.

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

USO has not requested and will not request any ruling from the IRS with respect to its classification as a partnership not taxable as a corporation for federal income tax purposes.

If the IRS were to successfully assert that USO is taxable as a corporation for federal income tax purposes in any taxable year, rather than passing through its income, gains, losses and deductions proportionately to shareholders, USO would be subject to tax on its net income for the year at corporate tax rates.

In addition, although USCF does not currently intend to make distributions with respect to shares, any distributions would be taxable to shareholders as dividend income.

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

federal income tax purposes.

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

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

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

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

7 unchanged sentences

A shareholder, therefore, may be allocated income or gain by USO but receive no cash distribution with which to pay the tax liability resulting from the allocation, or may receive a distribution that is insufficient to pay such liability.

In addition to federal income taxes, shareholders may be subject to other taxes, such as state and local income taxes, unincorporated business taxes, business franchise taxes and estate, inheritance or intangible taxes that may be imposed by the various jurisdictions in which USO does business or owns property or where the shareholders reside.

In addition to U.S.

federal income taxes, shareholders may be subject to other taxes, such as state and local income taxes, unincorporated business taxes, business franchise taxes and estate, inheritance or intangible taxes that may be imposed by the various jurisdictions in which USO does business or owns property or where the shareholders reside.

Although an analysis of those various taxes is not presented here, each prospective shareholder should consider their potential impact on its investment in USO.

12 unchanged sentences

tax reform on USO is uncertain.

On December 22, 2017, H.R.

1, the bill formerly known as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), was signed into law.

The Tax Act substantially alters the U.S.

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.

economy or the demand for and the price of commodities.

As a result, it is possible that the Tax Act, as well as any U.S.

Treasury regulations, administrative interpretations or court decisions interpreting the Tax Act and any future legislation related to tax reform, could have unexpected or negative impacts on USO and some or all of its shareholders.

Shareholders are urged to consult with their tax advisor regarding tax legislative, regulatory, or administrative developments and proposals and their potential effect on an investment in USO.

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

The rules dealing with U.S.

federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S.

Treasury Department.

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

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

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

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

OTC Contract Risk

10 unchanged sentences

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.

In addition, while market makers and dealers generally quote indicative prices or terms for entering into or terminating OTC contracts, they typically are not contractually obligated to do so, particularly if they are not a party to the transaction.

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, for OTC derivatives, 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.

In addition, while market makers and dealers generally quote indicative prices or terms for entering into or terminating

OTC contracts, they typically are not contractually obligated to do so, particularly if they are not a party to the transaction.

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

2 unchanged sentences

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.

If market conditions require it, USO may implement risk reduction procedures, which may include changes to USO’s investments, and such changes 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.

15 unchanged sentences

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.

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

As of the date of this 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 USO may determine to invest in other Oil Futures Contracts and, Other Oil-Related Investments.

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.

evolving market conditions, a change in regulatory 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.

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 at www.uscfinvestments.com.

USO’s positions in Oil Futures Contracts and Other Oil Related Investments roll over a ten-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.

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.

2 unchanged sentences

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.

2 unchanged sentences

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

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

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

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

Shares may trade at a premium or discount to NAV per share.

Shares may trade at a premium or discount relative to NAV per share.

The lack of an active trading market for USO’s shares may result in losses on an investor’s investment in USO at the time the investor sells the shares.

21 unchanged sentences

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

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 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.

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

USCF’s Board of Directors currently consists of four Management Directors, who are also executive officers or employees of USCF, and three Non-Management Directors, who 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.

2 unchanged sentences

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

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

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

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

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

Gerber to exercise his indirect control of Wainwright to effect the removal of any Director (including the Non-Management

Directors which comprise the Audit Committee) and to replace that Director with another Director.

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

40 unchanged sentences

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.

26 unchanged sentences

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.

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

However, if a substantial number of requests for Creation Baskets are received by 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, related supply chain disruptions and ongoing disputes among oil-producing countries regarding limits on the production of crude oil), there could be a shortage of USO shares.

Among other things, such conditions could result in circumstances where 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, related supply chain disruptions and ongoing 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.

4 unchanged sentences

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.

[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, related supply chain disruptions and ongoing 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.

14 unchanged sentences

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

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

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

When interest rates fall, USO 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.

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

USO invests in government money market funds.

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 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.

29 unchanged sentences

Adverse effects can become particularly acute if those events affect USO’s electronic data processing, transmission, storage, and retrieval systems, or impact the availability, integrity, or confidentiality of our data.

In addition, a service provider that has experienced a cyber-security incident may divert resources normally devoted to servicing USO to addressing the incident, which would be likely to have an adverse effect on USO’s operations.

Cyber-attacks may also cause disruptions to the futures exchanges and clearinghouses through which USO invests in futures contracts, which could result in disruptions to USO’s ability to pursue its investment objective, resulting in financial losses to USO and its shareholders.

In addition, substantial costs may be incurred in order to prevent any cyber incidents in the future.

USO and its shareholders could be negatively impacted as a result.

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.

While USCF and the Related Public Funds, including USO, have established business continuity plans, there are inherent limitations in such plans, including the possibility that certain risks have not been identified or that new risks will emerge before countervailing measures can be implemented.

Furthermore, USO cannot control cybersecurity plans and systems of its service providers, market makers or Authorized Participants.

USO’s investment returns could be negatively affected by climate change and greenhouse gas restrictions.

Driven by concern over the risks of climate change, a number of countries have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas emissions or production and use of oil and gas.

These include adoption of cap and trade regimes, carbon taxes, trade tariffs, minimum renewable usage requirements, restrictive permitting, increased efficiency standards, and incentives or mandates for renewable energy.

Political and other actors and their agents increasingly seek to advance climate change objectives indirectly, such as by seeking to reduce the availability of or increase the cost for, financial and investment in the oil and gas sector and taking actions intended to promote changes in business strategy for oil and gas companies.

Many governments are also providing tax advantages and other subsidies to support transitioning to alternative energy sources or mandating the use of specific fuels other than

oil or natural gas.

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

USO and USCF are subjects of class action litigation.

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

USO, USCF and USCF’s directors and certain of its officers are currently subject to class action litigation.

Estimating an amount or range of possible losses resulting from litigation proceedings to USO and USCF is inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for monetary damages and are subject to appeal.

In addition, because most legal proceedings are resolved over extended periods of time, potential losses are subject to change due to, among other things, new developments, changes in legal strategy, the outcome of intermediate procedural and substantive rulings and other parties’ settlement posture and their evaluation of the strength or weakness of their case against USO and USCF.

For these reasons, we are currently unable to predict the ultimate timing or outcome of, or reasonably estimate the possible losses or a range of possible losses resulting therefrom.

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

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

For more information, see “Item 3.

Legal Proceedings” in this annual report on Form 10-K.

Unresolved Staff Comments.

2 unchanged sentences

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