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Item 7. Management’s Discussion and Analysis

2022-02-25 compared with 2021-02-26 · 169 added, 181 removed, 439 unchanged (44% of the section changed)

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

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

The following discussion should be read in conjunction with the financial statements and the notes thereto of USO included elsewhere in this annual report on Form 10-K.

Forward-Looking Information

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

changes in inflation in the United States;

movements in U.S.

and foreign currencies;

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

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

changes in inflation in the United States, movements in U.S.

and foreign currencies, market volatility in the crude oil markets and futures markets in part attributable to the COVID-19 pandemic, related supply chain disruption, ongoing disputes among oil-producing countries, uncertainties associated with the impact from the coronavirus (COVID-19) pandemic, including:

its impact on the global and U.S.

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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.

As described below, USO is currently unable to pursue its investment objective to the same degree that it has in the past due to market conditions, regulatory limitations imposed on USO, and risk mitigation measures taken by USO's FCM, each as described below.

As a result of these market conditions, regulatory limitations and risk mitigation measures, there is uncertainty as to whether USO will be able to achieve the same level of success as before in meeting its investment objective.

As described below, USO is currently unable to pursue its investment objective with the same high degree of success that it has in the past due to its limited ability to invest in the Benchmark Oil Futures Contract and certain other Oil Futures Contracts, as defined below, to the same extent it was able to before the market conditions and regulatory limitations imposed on USO, which occurred in the Spring of 2020, and risk mitigation measures taken by USO’s FCMs as a result, as described herein, arose.

As a result of such market conditions, the regulatory conditions that were and could again be imposed, and the risk mitigation measures imposed by its FCMs, there is still uncertainty as to whether USO will be able to achieve its investment objective within as narrow a percentage change difference in its NAV for any period of 30 successive valuation days and the average daily percentage change in the price of the Benchmark Oil Futures Contract as it typically had prior to the Spring of 2020 due to the foregoing factors.

USO’s investment objective is not for its NAV or market price of shares to equal, in dollar terms, the spot price of light, sweet crude oil or any particular futures contract based on light, sweet crude oil, nor is USO’s investment objective for the percentage change in its NAV to reflect the percentage change of the price of any particular futures contract as measured over a time period greater than one day .

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

and foreign exchanges (collectively, “Oil Futures

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

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

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

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

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

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As noted above, 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.

Historically, USO has achieved its investment objective by primarily investing in the Benchmark Futures Contract and Oil Futures Contracts for light, sweet crude oil traded on NYMEX and ICE Futures with the same maturity month as the Benchmark Futures Contract Certain circumstances could cause and have caused, as discussed below, USO to invest in Oil Futures Contracts other than the Benchmark Oil Futures Contract and may cause USO to invest in Other Oil-Related Investments.

Historically, USO has achieved its investment objective by primarily investing in the Benchmark Oil Futures Contract and Oil Futures Contracts for light, sweet crude oil traded on NYMEX and ICE Futures with the same maturity month as the Benchmark Oil Futures Contract Certain circumstances could cause and have caused, as discussed below, USO to invest in Oil Futures Contracts other than the Benchmark Oil Futures Contract and may cause USO to invest in Other Oil-Related Investments, including OTC swaps.

Such circumstances include:

the need to comply with regulatory requirements (including, but not limited to, exchange accountability levels and position limits imposed by NYMEX discussed below);

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

and risk mitigation measures taken by USO's FCM, RBC Capital, and other FCMs that further limit USO and other market participants from investing in particular crude oil futures contracts.

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, including as a result of the COVID-19 pandemic and the state of crude oil markets, USO has invested in Oil Futures Contracts (as defined below) in months other than the Benchmark Oil Futures Contract.

The foregoing has impacted the performance of USO and its ability meet its investment objective within as narrow a percentage difference between the average daily percentage change in USO’s NAV for any period of 30 successive valuation days and the average daily percentage change in the price of the Benchmark Oil Futures Contract as it typically has in the past.

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

and risk mitigation measures taken by USO’s FCM, RBC Capital, and other FCMs that limit USO and other market participants from investing in particular crude oil futures contracts.

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, including as a result of the COVID-19 pandemic and the state of crude oil markets, USO has invested in Oil Futures Contracts (as defined above) in months other than the Benchmark Oil Futures Contract.

USO’s investment in Oil Futures Contracts in months other than the Benchmark Oil Futures Contract, other Oil Futures Contracts and Other-Oil Related Interests (as defined below), is intended to be temporary but may continue indefinitely if the aforementioned market and regulatory conditions do not abate.

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The calculation is repeated daily.

In 2020, 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 countries over the potential limits on the production of crude oil, a corresponding collapse in demand for crude oil and a lack of on-land storage for crude oil.

These conditions have severely limited USO’s ability to have a substantial portion of its assets invested in the Benchmark Oil Futures Contract and certain other Oil Futures Contracts of the same month, such as cash-settled, but substantially similar, oil futures contracts traded on ICE Futures (the “ICE WTI Contract”).

Specifically, during 2020:

● NYMEX and ICE Futures have imposed accountability levels and position limits on USO’s investments in the Benchmark Oil Futures Contract and the ICE WTI Contract, respectively.

In 2020, significant market volatility occurred in the crude oil markets and the oil futures markets.

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

These conditions, together with the prospect that such conditions could reoccur, severely limited and continue to significantly limit USO’s ability to have a substantial portion of its assets invested in the Benchmark Oil Futures Contract and certain other Oil Futures Contracts of the same month, such as cash-settled, but substantially similar, oil futures contracts traded on ICE Futures (the “ICE WTI Contract”).

Specifically:

● In 2020, NYMEX and ICE Futures imposed accountability levels and position limits on USO’s investments in the Benchmark Oil Futures Contract and the ICE WTI Contract, respectively.

As described in more detail below, the NYMEX ordered USCF, USO and the Related Public Funds (as defined herein) 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 excess of 78,000 long futures contracts, for August 2020 in excess of 50,000 long futures contracts, and for September 2020 in excess of 35,000 long futures contracts.

While these limits no longer apply, NYMEX’s current accountability levels for any one month in the Benchmark Oil Futures Contract is 10,000 contracts, and accountability levels for all months which is 20,000 net futures contracts for light sweet crude oil, do

In addition, the ICE WTI Contract is subject to spot month and all-months-combined position limits established under the European Union’s Market in Financial Instruments Directive, as implemented by the Financial Conduct Authority in the United Kingdom.

ICE Futures also imposes accountability levels and position limits on the ICE WTI Contract.

It can be anticipated that under current market conditions that the foregoing accountability levels and position limits imposed will remain in place and could involve additional Oil Futures Contracts for later months, e.g., those expiring after September of 2020.

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

See “Accountability Levels, Position Limits and Position Limits and Price Fluctuation Limits” below.

● RBC has taken risk mitigation measures that constrain USO’s ability to invest in the Benchmark Oil Futures Contract and other Oil Futures Contracts.

● In 2020, RBC imposed risk mitigation measures that constrained USO’s ability to invest in the Benchmark Oil Futures Contract and other Oil Futures Contracts.

RBC, which at the time was USO’s only FCM, expressly informed USO that USO may not hold positions in the June Benchmark Oil Futures Contract expiring on May 19, 2020.

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RBC also advised USO at that time, 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 on positions imposed by RBC on holdings in USO’s portfolio apply regardless of whether the Oil Futures Contracts purchased would be within the accountability levels and position limits permitted by NYMEX and ICE.

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

● On May 28, 2020, USO entered into an agreement with RCG, to become an additional FCM for USO, on June 5, 2020, USO entered into an agreement with MCM to become an additional FCM for USO, and, on December 3, 2020, USO entered into an agreement with MFUSA to become an additional FCM for USO.

Neither RCG nor MCM 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.

The limits on positions 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.

● Subsequent to RBC’s imposition of risk mitigation measures in 2020, USO entered into agreements with RCG, MCM and MFUSA to become additional FCMs for USO.

These FCMs have not 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 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 Future 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.

USO may enter into agreements with other FCMs and it cannot predict whether or when it will enter into such agreements.

● A large number of USO shares were purchased during a relatively short period of time in March and April 2020.

These events 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 permitted Oil Futures Contracts and has had to more frequently rebalance and adjust the types of holdings in its portfolio than in the past.

In addition, the current limitations being imposed by the exchanges and RBC will limit USO’s ability to invest the proceeds of the purchases of Creation Baskets in Oil Futures Contracts.

As a result, when USO offers to sell Creation Baskets, USO may be limited in its ability to invest in Oil Futures Contracts, including the Benchmark Oil Futures Contract, and may be required to 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.

These events significantly limited USO’s current ability to have a substantial portion of its assets invested in the Benchmark Oil Futures Contract and, during the Spring of 2020, in other Oil Futures Contracts.

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

In addition, the limitations imposed by the exchanges and FCMs, especially during the Spring of 2020, limited USO’s ability to invest in certain Oil Futures Contracts.

As a result, USO was and will be limited in its ability to invest in Oil Futures Contracts, including the Benchmark Oil Futures Contract, and may be required to invest in other permitted investments including Other Oil-Related Interests, such as OTC swaps, and may hold larger amounts of Treasuries, cash and cash equivalents, which will further impair USO’s ability to meet its investment objective.

USO has had the ability to invest in Oil Futures Contracts beyond the Benchmark Oil Futures Contract and in Other Oil-Related Investments but, until recently, USO’s need to exercise its discretion in making such investments has been limited.

Current circumstances, including market conditions and evolving regulatory requirements and evolving FCM risk mitigation measures, require USO to exercise greater discretion in investing than in the past.

The parameters for the decision-making regarding the permitted investments USO will hold and the intended order of priority it will consider in selecting investments to be held in USO’s portfolio are set forth and discussed in greater detail below.

Certain circumstances including market conditions, applicable regulatory requirements and risk mitigation measures imposed by FCMs, counterparties or other market participants, have required USO to exercise greater discretion in investing than in the past.

USO has established parameters for the decision-making regarding the permitted investments USO will hold and the intended order of priority it will consider in selecting investments to be held in USO’s portfolio as set forth and discussed in greater detail below.

The application of the below parameters requires USO to exercise its discretion.

If, due to regulatory requirements, risk mitigation measures, market conditions, liquidity requirements or other factors, USO is not able to invest in accordance with such parameters and the intended order of priority, such methodology may change.

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 the following permitted investments taking into account the order, or waterfall, set forth below when USO increases or decreases either its portfolio overall or its holdings of particular investments:

The type and percentages of investments to be held by USO at the end of the monthly roll period as well as for any rebalances are published on USO’s website at www.uscfinvestments.com.

Accordingly, for the foreseeable future, to address and comply with the market conditions, regulatory requirements or other factors that have influenced, and may continue to influence, its investment decisions, USO intends to buy or sell the following permitted investments taking into account the order, or waterfall, set forth below when USO increases or decreases either its portfolio overall or its holdings of particular investments:

The current or front month (“first month”) Oil Futures Contracts based on the price of the light, sweet crude oil known as West Texas Intermediate (“WTI”) or, which are priced off of the oil futures contracts based on WTI as traded on the NYMEX including the Benchmark Oil Futures Contracts and the ICE WTI Contract (“WTI Oil Futures Contracts”);

The first month, the next or following month (“second month”, with months thereafter 2.

being numerically designated, i.e., the third month, the fourth month, the fifth month, etc.) and the third month WTI Oil Futures Contracts;

The first month, the next or following month (“second month”, with months thereafter being numerically designated, i.e., the third month, the fourth month, the fifth month, etc.) and the third month WTI Oil Futures Contracts;

The first through the sixth month WTI Oil Futures Contracts, plus the next nearest June WTI Oil Futures Contracts or the next nearest December WTI Oil Futures Contracts that is not included in the first through sixth months;

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The first through the twelfth month WTI Oil Futures Contracts plus the second through thirteenth month Oil Futures Contracts based on Brent Crude Oil traded on ICE Futures (“Brent Oil Futures Contracts”);

The first through the twelfth month WTI Oil Futures Contracts Months plus the second through thirteenth month Brent Oil Futures Contracts plus the first through the twelfth month Oil Futures Contracts based on Ultra Low Sulfur Diesel Oil Futures Contract traded on NYMEX (“USDL Oil Futures Contract”);

The first through the twelfth month WTI Oil Futures Contracts plus the second through thirteenth month Brent Oil Futures Contracts plus the first through the twelfth month Oil Futures Contracts based on Ultra Low Sulfur Diesel Oil Futures Contract traded on NYMEX (“USDL Oil Futures Contract”);

The first through the twelfth month WTI Oil Futures Contracts plus the second through thirteenth month Brent Oil Futures Contracts plus the first through the twelfth month USDL Oil Futures Contracts plus the first through the twelfth month RBOB Gasoline Oil Futures Contracts (“Gasoline Futures Contract”);

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Other Oil-Related Investments, in addition to the foregoing investments.

If, due to regulatory requirements, risk mitigation measures, market conditions, liquidity requirements or other factors, USO is not available to invest in a particular month contract described above, then it will adjust the methodology incrementally beginning from the nearest month contract available to it that it is reasonable or feasible to hold in light of such factors.

USO will progress through the stages of the above-described waterfall of permitted investments as it approaches regulatory or other limits or as necessary to address market conditions, liquidity requirements or other factors, including additional investments in USO, requiring consideration of particular levels of the waterfall.

Generally, USO will invest in each stage of the waterfall in the order described above.

However, USO, in its sole discretion, may proceed to invest in a further stage of the waterfall (i.e., skipping over a particular stage) if it determines it may exceed position limits in the immediately following stage of the above waterfall within the next month or due to other regulatory requirements, risk mitigation measures, market conditions, liquidity requirements or other factors.

If, due to regulatory requirements, risk mitigation measures, market conditions, liquidity requirements or other factors, USO is not able to invest in a particular month contract described above, then it will adjust the methodology incrementally beginning from the nearest month contract available to it that it is reasonable or feasible to hold in light of such factors.

If USO uses OTC swaps or other instruments, those OTC swaps or instruments would also provide exposure to one or more of the same above-described permitted investments in varying months or contracts.

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The progression from one stage of permitted investments described in the above waterfall to the next stage, including the specific target weights for the particular portfolio investments to be held by USO, will take into account, to the extent applicable, the relative levels of open interest, position limits, and other factors.

The specific permitted investments and the identified target weights for such investments, consistent with progression from one stage of the above described waterfall to the next stage, will be published on the website the day before the start of (i) any monthly roll/rebalance period for the end of such roll/rebalance period, and (ii) any rebalancing to be done outside of the monthly roll period due to market conditions, regulatory requirements and other factors described herein.

The specific permitted investments and the identified target weights for such investments, consistent with progression from one stage of the above-described waterfall to the next stage, will be published on the website the day before the start of (i) any monthly roll/rebalance period for the end of such roll/rebalance period, and (ii) any rebalancing to be done outside of the monthly roll period due to market conditions, regulatory requirements or other factors described herein.

In extreme circumstances, changes may need to be made intraday.

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Published portfolio changes will be implemented by USO over the course of the roll/rebalance period as indicated on the website or over the course of another day or period with respect to a particular change outside of the roll.

USO will progress through the stages of the above describe waterfall of permitted investments as it approaches regulatory or other limits or as necessary to address market conditions, or other factors, including additional investments in USO, requiring consideration of particular levels of the waterfall.

Generally, USO will invest in each stage of the waterfall in the order described above.

The investment intention announced by USO could change 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 USO’s ability to invest in the Benchmark Oil Futures Contract could be limited by any of these occurrences.

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.

evolving market conditions, liquidity requirements, 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 USO’s ability to invest in the Benchmark Oil Futures Contract could be limited by any of these occurrences.

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, liquidity requirements, 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.

USCF may not be able to fully invest USO’s assets in Benchmark Oil Futures Contracts having an aggregate notional amount exactly equal to USO’s NAV.

For example, as standardized contracts, the Benchmark Oil Futures Contracts are for a specified amount of a particular commodity, and USO’s NAV and the proceeds from the sale of a Creation Basket are unlikely to be an exact multiple of the amounts of those contracts.

As a result, in such circumstances, USO may be better able to achieve the exact amount of exposure to changes in price of the Benchmark Oil Futures Contract through the use of Other Oil-Related Investments, such as OTC contracts that have better correlation with changes in price of the Benchmark Oil Futures Contract.

As a result, in such circumstances, USO may be better able to achieve the exact amount of exposure to changes in price of the Benchmark Oil Futures Contract through the use of Other Oil-Related Investments, such as OTC contracts (e.g., swaps) that have better correlation with changes in price of the Benchmark Oil Futures Contract.

USCF does not anticipate letting USO’s Oil Futures Contracts expire and taking delivery of the underlying commodity.

Instead, USCF will close existing positions, e.g., when it changes the Benchmark Oil Futures Contracts or Other Oil-Related Investments or it otherwise

determines it would be appropriate to do so and reinvests the proceeds in new Oil Futures Contracts or Other Oil-Related Investments.

Instead, USCF will close existing positions, e.g., when it changes the Benchmark Oil Futures Contracts or Other Oil-Related Investments or it otherwise determines it would be appropriate to do so and reinvests the proceeds in new Oil Futures Contracts or Other Oil-Related Investments.

Positions may also be closed out to meet orders for Redemption Baskets and in such case proceeds for such baskets will not be reinvested.

While it is USO’s expectation that at some point in the future it will be able to return to primarily investing in the Benchmark Oil Futures Contract, there can be no guarantee of when, if ever, that will occur.

In addition, because of the limitations being imposed on USO by its regulators and its FCMs, USO may be limited in investing in other Oil futures Contracts in addition to the Benchmark Oil Futures Contract.

These limitations would apply even if USO were to receive and accept request for Redemption Baskets lowering its current holdings in Oil Futures Contracts below the limits now being imposed on it.

The foregoing could limit the ability of USO (i) to reallocate its investments to more favorably meet its investment objective or (ii) in connection with the purchase of Creation Baskets, to invest the proceeds of such purchases in Oil Futures Contracts.

As a result, investors in USO should expect USO’s ability to invest in the Benchmark Oil Futures Contract and other Oil Futures Contracts to continue to be limited and USO may be required to invest in Other Oil-Related Interests.

As a result, there will be continued wider deviations between the performance of USO’s investments and the Benchmark Oil Futures Contract, and that changes in USO’s share price may not be able to track changes in the price of the Benchmark Oil Futures Contract at the same favorable levels as before or within the range of its investment objective.

The inability to closely track the Benchmark Oil Futures Contract and, as described in this annual report on Form 10-K, the changes in its portfolio of investments and the impact of higher levels of contango, will impact the performance of USO and the value of its shares.

In addition, because of the limitations imposed on USO, for example, by its regulators and its FCMs, USO may be limited in investing in other Oil Futures Contracts in addition to the Benchmark Oil Futures Contract.

Limitations on USO may negatively impact the ability of USO (i) to reallocate its investments to more favorably meet its investment objective or (ii) in connection with the purchase of Creation Baskets, to invest the proceeds of such purchases in Oil Futures Contracts.

As a result, investors in USO should expect USO’s ability to invest in the Benchmark Oil Futures Contract and other Oil Futures Contracts will continue to be limited and USO may be required to invest in Other Oil-Related Interests.

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, including as a result of the COVID-19 pandemic and the state of crude oil markets, USO has invested in Oil Futures Contracts in months other than the Benchmark Oil Futures Contract.

[USO’s investment in Oil Futures Contracts in months other than the Benchmark Oil Futures Contract, other Oil Futures Contracts and Other-Oil Related Interests, is intended to be temporary but may continue indefinitely if the aforementioned market and regulatory conditions do not abate.

Until such time as USO is able to return to investing in the Benchmark Oil Futures Contract, its performance and ability to meet its investment objective will continue to be impacted.]

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

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

In addition, the ICE Futures 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 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.

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

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

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

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

While these limits no longer apply, NYMEX current accountability levels for any one month in Benchmark Oil Futures Contracts, which is 10,000 contracts, and an accountability level for all months, which is 20,000 net futures contracts for light sweet crude oil do, apply.

As of December 31, 2021, USO held 32,136 NYMEX WTI Crude Oil Futures CL contracts and did not hold any ICE WTI Crude Oil Futures contracts.

USO exceeded accountability levels of the NYMEX during the year ended December 31, 2020, including when it held a maximum of 234,415 Crude Oil Futures CL contracts, on the NYMEX, exceeding the “any” month limit.

Additionally, USO exceeded accountability levels imposed by the ICE Futures for the year ended December 31, 2020, including when it held a maximum of 58,488 Crude Oil Futures CL contracts, on the ICE, exceeding the "any"

USO exceeded accountability levels of the NYMEX during the year ended December 31, 2021, including when it held a maximum of 73,956 Crude Oil Futures CL contracts on the NYMEX, exceeding the “any” month accountability limit.

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.

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Commencing with the monthly roll that occurred 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.

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.

For the year ended December 31, 2020, USO did not exceed any position limits imposed by the NYMEX but did exceed position limits imposed by ICE Futures during the period of April 21 to April 23, 2020.

However, no action was taken by ICE Futures as a result.

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 for any rebalances are published on its website www.uscfinvestments.com.

For the year ended December 31, 2021, USO did not exceed any position limits imposed by the NYMEX and ICE Futures.

The April 23 CME Letter, discussed above, 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.

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Due to evolving market conditions, a change in regulator accountability levels and position limits imposed on USO with respect to its investment in Oil Futures Contracts as discussed in the CME Letters, remaining within relevant accountability levels and position limits, and, additional or different risk mitigation measures taken by USO’s FCM with respect to USO acquiring additional Oil Futures contracts, USO has invested and intends to invest in other permitted investments, beyond the Benchmark Oil Futures Contract.

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

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

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

Business” and “Item 1A.

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

Futures Contracts and Position Limits

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

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

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

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

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

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

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

The Benchmark 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.

If USO engages in OTC swaps, the following may apply.

Margin requirements

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

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

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

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

If a swap is required to be cleared, initial

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

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

futures exchanges and markets.

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

futures contracts in the United States.

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

exchanges to be offered and sold in the United States.

Money Market Funds

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

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

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

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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.

Although such government MMFs 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 MMF.

An investment in a government MMF is not insured or guaranteed by the Federal Deposit Insurance Corporation (the “FDIC”) or any other government agency.

The share price of a government MMF can fall below the $1.00 share price.

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

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

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

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

Price Movements

Crude oil futures prices were volatile during the year ended December 31, 2020 and exhibited moderate daily swings along with an uneven upward trend during the year.

Crude oil futures prices were volatile during the year ended December 31, 2021.

The price of the Benchmark Oil Futures Contract started the year at $48.52 per barrel.

The high of the year was on January 6, 2020 when the price reached $63.27 per barrel.

The low for the year was on April 21, 2020, which was $11.57 per barrel.

The year ended with the Benchmark Oil Futures Contract at $48.52 per barrel, a decrease of approximately (20.54)% over the year.

USO’s per share NAV began the year at $102.27 * and ended the year at $33.07 on December 31, 2020, a decrease of approximately (67.66)% over the year.

The high of the year was on October 26, 2021 when the price reached $84.65 per barrel.

The low for the year was on January 4, 2021, which was $47.62 per barrel.

The year ended with the Benchmark Oil Futures Contract at $75.21 per barrel, an increase of approximately 55.01% over the year.

USO’s per share NAV began the year at $33.07 and ended the year at $54.18 on December 31, 2021, an increase of approximately 63.83% over the year.

The Benchmark Oil Futures Contract prices listed above began with the February 2021 contracts and ended with the February 2022 contracts.

The decrease of approximately (20.54)% on the Benchmark Oil Futures Contract listed above is a hypothetical return only and could not actually be achieved by an investor holding Oil Futures Contracts.

The increase of approximately 55.01% on the Benchmark Oil Futures Contract listed above is a hypothetical return only and could not actually be achieved by an investor holding Oil Futures Contracts.

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

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

* Adjusted to give effect to the reverse share split of 1-for-8 effected on April 28, 2020.

The Condensed Statement of Operations have been adjusted for the periods shown to reflect the 1-for-8 reverse share split on a retroactive basis.

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

On days when the market is in contango, the price of the near month crude Oil Futures Contract was lower than the price of the next month crude Oil Futures Contract, or contracts further away from expiration.

On days when the market is in backwardation, the price of the near month crude Oil Futures Contract is higher than the price of the next month crude Oil Futures Contract or contracts further away from expiration.

During the year ended December 31, 2021, the crude oil futures market alternated between conditions of contango and backwardation.

On days when the market was in contango the price of the near month crude Oil Futures Contract was lower than the price of the next

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

On days when the market was in backwardation, the price of the near month crude Oil Futures Contract was higher than the price of the next month crude Oil Futures Contract or contracts further away from expiration.

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

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New York time.

USO'S Administrator uses the NYMEX closing price (determined at the earlier of the close of the NYMEX or 2:30 p.m.

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

USO’s Administrator uses the settlement price determined by NYMEX at 2:30 p.m.

Eastern time for the Oil Futures Contracts held on the NYMEX and the settlement price determined by ICE Futures at 2:30 p.m.

Eastern time for the Oil Futures Contracts held on ICE Futures, but calculates or determines the value of all other USO investments, other futures contracts, as of the earlier of the close of the NYSE Arca or 4:00 p.m.

New York time.

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In connection with the reverse share split, the CUSIP number for USO’s shares changed to 91232N207.

USO's ticker symbol, "USO,"

remains the same.

The accompanying unaudited condensed financial statements have been adjusted to reflect the effect of the reverse share split on a retroactive basis.

USO’s ticker symbol, “USO,” remained the same.

The accompanying unaudited financial statements have been adjusted to reflect the effect of the reverse share split on a retroactive basis.

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

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As of December 31, 2021, USO had the following Authorized Participants:

ABN Amro, BNP Paribas Securities Corp., Citadel Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities USA LLC, Goldman Sachs & Company, JP Morgan Securities Inc., Merrill Lynch Professional Clearing Corp., Morgan Stanley & Company Inc., Nomura Securities International Inc., RBC Capital Markets LLC, SG Americas Securities LLC, UBS Securities LLC and Virtu Financial BD LLC.

ABN Amro, BNP Paribas Securities Corp., Citadel Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities USA LLC, Goldman Sachs & Company, JP Morgan Securities LLC, Merrill Lynch Professional Clearing Corp., Morgan Stanley & Company Inc., RBC Capital Markets LLC, SG Americas Securities LLC, UBS Securities LLC and Virtu Financial BD LLC.

For the Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020

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

* Adjusted to give effect to the reverse share split of 1-for-8 effected on April 28, 2020.

Portfolio Expenses.

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The fee is accrued daily and paid monthly.

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

The increase in the per share NAV for the year ended December 31, 2021, compared to the year ended December 31, 2020, was due primarily to higher prices for WTI crude oil and the related increase in the value of the Oil Futures Contracts in which USO held and traded.

Average interest rates earned on short-term investments held by USO, including cash, cash equivalents and Treasuries, were lower during the year ended December 31, 2021, compared to the year ended December 31, 2020.

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

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

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

The increase in total fees and other expenses excluding management fees for the year ended December 31, 2021, compared to the year ended December 31, 2020 was due primarily to an increase in tax reporting and professional fees.

The decrease in total commissions accrued to brokers for the year ended December 31, 2021, compared to the year ended December 31, 2020, was due primarily to a lower number of Oil Futures Contracts being held and traded.

Tracking USO’s Benchmark

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The average daily difference was 0.049% (or 4.9 basis points, where 1 basis point equals 1/100 of 1%), meaning that over this time period USO’s NAV performed within the plus or minus 10% range established as its benchmark tracking goal.

The average daily difference expressed as a percentage of the average daily changes in the Benchmark Oil Futures Contract for the same period was (3.794)%.

This ratio expressed in percentage

terms is significantly affected by days or periods with flat price returns, and therefore, is not a meaningful measure of how well USO tracks its benchmark.

Since the commencement of the offering of USO’s shares to the public on April 10, 2006 to December 31, 2021, the average daily change in the Benchmark Oil Futures Contract was (0.007)%, while the average daily change in the per share NAV of USO over the same time period was (0.025)%.

The average daily difference was (0.018)% (or (1.8)% basis points, where 1 basis point equals 1/100 of 1%), meaning that over this time period USO’s NAV performed within the plus or minus 10% range established as its benchmark tracking goal.

The average daily difference expressed as a percentage of the average daily change in Benchmark Oil Futures Contract for the same period was (0.379)%.

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

The following two graphs demonstrate the correlation between the changes in USO‘s NAV and the changes in the Benchmark Oil Futures Contract.

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However, if USO’s daily changes in its per share NAV had instead exactly tracked the changes in the daily total return of the Benchmark Oil Futures Contract, USO would have had an estimated per share NAV of $53.75 as of December 31, 2021, for a total return over the relevant time period of 62.53%.

The difference between the actual per share NAV total return of USO of (67.66)% and the expected total return based on the Benchmark Oil Futures Contract of (42.98)% was a difference over the time period of (24.68)%, which is to say that USO’s actual total return underperformed its benchmark by that percentage.

The difference between the actual per share NAV total return of USO of 63.83% and the expected total return based on the Benchmark Oil Futures Contract of 62.53% was a difference over the time period of 1.30%, which is to say that USO’s actual total return outperformed its benchmark by that percentage.

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

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

* Adjusted to give effect to the reverse share split of 1-for-8 effected on April 28, 2020 .

By comparison, for the year ended December 31, 2020, the actual total return of USO as measured by changes in its per share NAV was (67.66)%.

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However, if USO’s daily changes in its per share NAV had instead exactly tracked the changes in the daily total return of the Benchmark Oil Futures Contract, USO would have had an estimated per share NAV of $58.31 as of December 31, 2020, for a total return over the relevant time period of (42.98)%.

The difference between the actual per share NAV total return of USO of 33.37% and the expected total return based on the Benchmark Oil Futures Contract of 31.50% was a difference over the time period of 1.87%, which is to say that USO’s actual total return outperformed its benchmark by that percentage.

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

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

While it is USO's expectation that at some point in the future it will return to primarily investing in the Benchmark Futures Contract and related ICE Futures contracts or other similar futures contracts of the same tenor based on light, sweet crude oil, there can be no guarantee of when, if ever, that will occur.

As a result, investors in USO should expect that there will be continued deviations between the performance of USO's investments and the Benchmark Futures Contract and that USO may not be able to track the Benchmark Futures Contract or meet its investment objective.

As a result of market conditions and the regulatory response that occurred in March 2020 and thereafter, 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, and risk mitigation measures imposed by its FCMs, 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.

* Adjusted to give effect to the reverse share split of 1-for-8 effected on April 28, 2020.

While it is USO’s expectation that at some point in the future it will return to primarily investing in the Benchmark Oil Futures Contract and related ICE Futures contracts or other similar futures contracts of the same tenor based on light, sweet crude oil, there can be no guarantee of when, if ever, that will occur.

As a result, investors in USO should expect that there will be continued wider deviations between the performance of USO’s investments and the Benchmark Oil Futures Contract than prior to the Spring of 2020, and changes in USO’s share price may not be able to track changes in the price of Benchmark Oil Futures Contract within as narrow a percentage change difference for any period of successive valuation days as it typically has prior to the Spring of 2020.

That said, in the third quarter of 2021 the average daily difference between the return of USO’s NAV and the Benchmark Oil Futures Contract was 0.023% (or 2.3 basis points).

There are three factors that typically have impacted or are most likely to impact USO’s ability to accurately track Benchmark Oil Futures Contract in addition to the foregoing.

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

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

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

During the year ended December 31, 2021, USCF attempted to minimize the effect of these transactions by seeking to execute its purchase or sale of Oil Futures Contracts at, or as close as possible to, the end of the day settlement price.

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

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

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

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

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

USCF anticipates that interest rates may begin to rise over the near future.

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

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During the year ended December 31, 2021, USO did not hold any Other Oil-Related Investments.

If USO increases in size, and due to its obligations to comply with market conditions, regulatory limits, and risk mitigation measures imposed by its FCMs, USO may invest in Other Oil-Related Investments which may have the effect of increasing transaction related expenses and may result in increased tracking error.

If USO increases in size, and due to its obligations to comply with market conditions, regulatory limits, and risk mitigation measures imposed by its FCMs, USO may invest in Other Oil-Related Investments, such as OTC swaps, which may have the effect of increasing transaction related expenses and may result in increased tracking error.

OTC swaps increase transaction-related expenses due to the fact that USO must pay to the swap counterparty certain fees that USO does not have to pay for transactions executed on an exchange.

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

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

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

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

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and global demand for crude oil and issues involving the physical transportation and storage of crude oil at Cushing, Oklahoma, the primary pricing point for oil traded in the U.S., led to unusually high inventories of crude oil.

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

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

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

However, at the end of November 2014, global crude oil inventories grew rapidly after OPEC voted to defend its market share against U.S.

shale-oil producers, resulting in

another period during which the crude oil market remained primarily in contango.

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

This period of contango continued through December 31, 2017.

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

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

In March 2020, contango dramatically increased and reached historic levels during the economic crisis arising from the COVID-19 pandemic, related supply chain disruptions and ongoing disputes among oil producing countries.

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

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Likewise, contango returned to moderate levels in May 2020.

Prior to 2020, periods of contango or backwardation have not materially impacted USO’s investment objective of having the daily percentage changes in its per share NAV track the daily percentage changes in the price of the Benchmark Oil Futures Contract since the impact of backwardation and contango tended to equally impact the daily percentage changes in price of both USO’s shares and the Benchmark Oil Futures Contract.

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

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

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

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 in months other than the Benchmark Oil Futures Contracts.

To approximate its investment objective, USO has chosen from its permitted investments types and amounts of Oil Futures Contracts allowed by its current regulatory requirements and under the risk mitigation efforts of its FCMs and other market participants, including those Oil Futures Contracts with expiration dates for months later than that of the Benchmark Futures Contract.

During the twelve months ended December 31, 2021, the crude oil futures market was primarily in a state of backwardation as measured by the difference between the front month and the second month contract.

As a result of market and regulatory conditions, including significant market volatility, large numbers of USO shares purchased during a short period of time, applicable regulatory accountability levels and position limits on oil futures contracts, and FCM risk mitigation measures that were imposed on USO, in 2020, USO invested in Oil Futures Contracts in months other than the Benchmark Oil Futures Contracts and was limited in its investments in the Benchmark Oil Futures Contract.

In order to continue to meet its investment objective, USO has chosen from its permitted investments types and amounts of Oil Futures Contracts allowed by its current regulatory requirements and under the risk mitigation efforts of its FCMs and other market participants, including those Oil Futures Contracts with expiration dates for months later than that of the Benchmark Oil Futures Contract.

Continued holdings in these later month contracts may allow USO to experience lesser effects from contango than would be the case if USO’s holdings were primarily in Oil Futures Contracts in the first month or second month.

Likewise, continued holdings in these later month contracts also could cause USO to experience lesser effects from backwardation than would be the case if USO’s holdings were primarily in Oil Futures Contracts in the first month or second month.

As a result, investors in USO should expect that there may be deviations between the performance of USO's investments and the Benchmark Futures Contract and that USO may not be able to track the Benchmark Futures Contract or meet its investment objective as closely as it has in the past.

That said, in the fourth quarter of 2020 the average daily difference between the return of USO's NAV and the Benchmark Futures Contract was (0.035)% (or (3.5) basis points).

While USO continues to invest in later month contracts, there is no assurance that this will continue and if USO returns to primarily investing in the Benchmark Oil Futures Contract it will be subject to greater effects of contango and backwardation.

Crude Oil Market .

During the year ended December 31, 2020, crude oil prices traded in a range between $11.57 to $63.27.

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

During the year ended December 31, 2021, the price of the front month WTI crude oil futures contract traded in a range between $47.62 to $84.65.

Prices increased 55.01% from December 31, 2020 through December 31, 2021, finishing the year at $75.21.

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

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

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

Supply declined largely due to the historic agreement in April of 2020 between the United States, OPEC, Russia, and other oil producers.

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

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

supply fall further.

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

fall further.

Finally, in late June of 2020 storage in the U.S.

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

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

The unprecedented twin crises described above caused unparalleled effects on oil futures markets during 2020.

First, front month WTI Oil Futures Contract prices dipped below $20 for the first time since 2002 and hit an all-time closing low of $(37.63).

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and around the world.

Specifically, the price of the front month WTI Oil Futures Contract fell to an extreme position relative to futures contracts with expiration dates in later months.

Specifically, the price of the front month WTI Oil Futures Contract detached from the rest of the futures curve and fell to an extreme position relative to futures contracts with expiration dates in later months.

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

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However, in late April of 2020, the correlation of the price of the front and second month WTI Oil Futures Contracts was (24)%, meaning that these contracts were moving in opposite directions.

previous record.

This divergence caused with different expiration dates to move in different directions.

For example, typically move together (i.e., increase or decrease) about 99% of the time.

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

Fourth, USO, among other market participants, diversified its portfolio away from the front of the futures curve in favor of deferred contract months, as discussed in this Form 10-Q.

The move by USO and other market participants to deferred contract months caused a historic change to relative levels of open interest among the different futures contracts.

The move by USO and other market participants to deferred contract months caused a historic change during 2020 to relative levels of open interest among the different futures contracts.

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

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

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

WTI crude oil inventories in the United States fell from a modern record of 541 mbd in June to 493 mbd by the end of 2020.

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

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

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

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

As economies reopened and OPEC+ supply cuts were absorbed by the market, WTI crude oil prices rose from all-time lows in the spring of 2020 to an average of $68.00 per barrel during calendar year 2021.

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

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

Production rose to 11.8 mbd by December 31, 2021.

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

It is uncertain how quickly OPEC, Russia, or the U.S.

can or will return to pre-pandemic 2019 production levels.

Meanwhile, U.S.

vehicle miles traveled and jet fuel use have nearly recovered to pre-pandemic levels.

The ongoing demand recovery for crude oil has resulted in higher prices.

Supply constraints, worker shortages, infrastructure and manufacturing energy usage, and geopolitical tensions, all suggest potential further upside for crude oil.

However, elevated risk remains in the oil markets until the full impact of past, current, and future COVID-19 pandemic mitigation measures is known.

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

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government bonds and global equities.

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

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

government bonds.

It can be seen that over this particular time period, the movement of crude oil on a monthly basis

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

equities, U.S.

government bonds and global equities, and limited correlation with natural gas.

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

US Gov’t Bonds

Global Equities

Correlation Matrix 10 Years

Equities (S&P 500)

(BEUSG4 Index)

(FTSE World Index)

Large Cap US Equities (S&P 500)

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

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

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

Government bonds, and natural gas.

Over the one year period ended December 31, 2021, movements of crude oil displayed strong correlation with unleaded gasoline, diesel- heating oil, large cap U.S.

equities, U.S.

Government bonds, global equities and natural gas.

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

US Gov’t Bonds

Global Equities

Correlation Matrix 1 Year

Equities (S&P 500)

(BEUSG4 Index)

(FTSE World Index)

Large Cap US Equities (S&P 500)

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Bloomberg, NYMEX

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

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

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

greater tracking error.

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

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

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Critical Accounting Policies

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

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

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

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

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

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

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During the year ended December 31, 2021, USO’s expenses exceeded the income USO earned and the cash earned from the sale of Creation Baskets and the redemption of Redemption Baskets.

During the year ended December 31, 2019, USO's expenses did not exceed the income USO earned and the cash earned from the sale of Creation Baskets and the redemption of Redemption Baskets.

During the year ended December 31, 2020, USO’s expenses exceeded the income USO earned and the cash earned from the sale of Creation Baskets and the redemption of Redemption Baskets.

To the extent expenses exceed income, USO’s NAV will be negatively impacted.

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While USCF has not and does not intend to leverage USO’s assets, it is not prohibited from doing so under the LP Agreement.

Although permitted to do so under its LP Agreement, USO has not and does not intend to leverage its assets and makes its investments accordingly.

USO has not and does not intend to leverage its assets and makes its investments accordingly.

Consistent with the foregoing, USO’s investments 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.

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

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

During the year ended December 31, 2021, USO did not purchase or

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

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

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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, 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.

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 USO to terminate USO.

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

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

USO, all assets of USO relating to domestic Oil Futures Contracts trading.

These FCMs are not allowed to commingle USO’s assets with their other assets.

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Similarly, under its current OTC agreements, USO requires that collateral it posts or receives be posted with its custodian, and under agreements among the custodian, USO and its counterparties, such collateral is segregated.

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

USO may purchase OTC swaps, see “Item 7A.

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

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USCF pays the fees of the Marketing Agent as well as BNY Mellon’s fees for performing administrative, custodial, and transfer agency services.

BNY Mellon’s fees for performing administrative services include those in connection with the preparation of USO’s condensed financial statements and its SEC, NFA and CFTC reports.

BNY Mellon’s fees for performing administrative services include those in connection with the preparation of USO’s financial statements and its SEC, NFA and CFTC reports.

USCF and USO have also entered into a licensing agreement with the NYMEX pursuant to which USO and the Related Public Funds, other than BNO, USCI and CPER, pay a licensing fee to the NYMEX.

USO also pays the fees and expenses associated with its tax accounting and reporting requirements.

USCF paid BBH&Co.'s fees for performing administrative services, including those in connection with the preparation of USO's condensed financial statements and its SEC, NFA and CFTC reports through May 31, 2020.

USCF paid BBH&Co.’s fees for performing administrative services, including those in connection with the preparation of USO’s financial statements and its SEC, NFA and CFTC reports through May 31, 2020.

In addition to USCF’s management fee, USO pays its brokerage fees (including fees to FCMs), OTC dealer spreads, any licensing fees for the use of intellectual property, and, subsequent to the initial offering, registration and other fees paid to the SEC, FINRA, or other regulatory agencies in connection with the offer and sale of shares, as well as legal, printing, accounting and other expenses associated therewith, and extraordinary expenses.

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USO also pays a portion of the fees and expenses of the independent directors of USCF.

See Note 3 to the Notes to Condensed Financial Statements in Item 8 of this annual report on Form 10-K.

See Note 3 to the Notes to Financial Statements in Item 8 of this annual report on Form 10-K.

The parties cannot anticipate the amount of payments that will be required under these arrangements for future periods, as USO’s per share NAVs and trading levels to meet its investment objective will not be known until a future date.

These agreements are effective for

a specific term agreed upon by the parties with an option to renew, or, in some cases, are in effect for the duration of USO's existence.

These agreements are effective for a specific term agreed upon by the parties with an option to renew, or, in some cases, are in effect for the duration of USO’s existence.

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis