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Item 1A. Risk Factors

2023-02-27 compared with 2022-02-25 · 91 added, 96 removed, 411 unchanged (31% of the section changed)

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

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

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

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

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

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

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

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

Other crude oil demand-related factors.

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Other crude oil supply-related factors.

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

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

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

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

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

World oil supply levels can also be affected by factors that reduce available supplies, such as adherence by member countries to OPEC production quotas and the occurrence of geopolitical risk associated with wars, terrorist attacks and tensions between countries, including sanctions imposed as a result of the foregoing that can adversely affect commodity trade flows by limiting or disrupting trade between countries or regions, natural disasters, disruptions in competitors’ operations, or unexpected unavailability of distribution channels that may disrupt supplies.

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

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

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

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

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

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

Significant market volatility has recently occurred in the commodities markets.

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

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

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

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

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

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

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

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

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

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

The longer-term impact on commodities and futures prices, including the spot price of light, sweet crude oil and the prices of the Oil Interests, is difficult to predict and depends on a number of factors that may have a negative impact on USO in the future.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

vaccination rates among the population;

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

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

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

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

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

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

Correlation Risk

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

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

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

Investing in USO's shares for hedging purposes involves the following risks:

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

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

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

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

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

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

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

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

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

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

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

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

Correlation Risk

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

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

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

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

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

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

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

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

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

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

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

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

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

The correlation between changes in prices of the Benchmark Oil Futures Contract and the spot price of light, sweet crude oil may at times be only approximate.

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

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

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

See “ Item 7.

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

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

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

In addition to accountability levels and position limits, the

NYMEX and ICE Futures also set daily price limits on futures contracts.

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

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

As a result of continued market volatility resulting from, among other things, the COVID-19 pandemic, related supply chain disruptions, ongoing disputes among oil-producing countries and the relatively large size of USO’s positions in Benchmark Oil Futures Contracts, the NYMEX imposed accountability levels and position limits on USO in two stages.

More specifically, USCF received letters from the CME on behalf of the NYMEX on April 16, 2020 (the “April 16 CME Letter”) and on April 23, 2020 (the “April 23 CME Letter”, and together with the April 16 CME Letter, the “CME Letters”).

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

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

The April 23 CME Letter ordered USCF, USO and the Related Public Funds not to assume a position in the light sweet crude oil futures contract for June 2020 in excess of 15,000 long futures contracts, for July 2020 in 78,000 long futures contracts, for August 2020 in 50,000 long futures contracts, for September 2020 in 35,000 long futures contracts.

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

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

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

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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 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.

The Benchmark Oil Futures Contract is 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.

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

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

Accordingly, and because such factors have continued to evolve, USO has had to invest in other Oil Futures Contracts and has had to more frequently

rebalance and adjust the types of holdings in its portfolio than in the past.

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

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

If this were the case, when selling Creation Baskets, USO may invest in other permitted investments, including Other Oil-Related Interests,

and may hold larger amounts of Treasuries, cash and cash equivalents, which will further impair USO’s ability to meet its investment objective.

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

An investor’s tax liability may exceed the amount of distributions, if any, on its shares.

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

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

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

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

Due to the application of the assumptions and conventions applied by USO in making allocations for tax purposes and other factors, an investor’s allocable share of USO’s income, gain, deduction or loss may be different than its economic profit or loss from its shares for a taxable year.

Due to the application of the assumptions and conventions applied by USO in making allocations for tax purposes and other factors, an investor’s allocable share of USO’s income, gain, deduction, loss or credit may be different than its economic profit or loss from its shares for a taxable year.

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

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

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

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

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

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

federal income tax rules pertaining to entities treated as partnerships for U.S.

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

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

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

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

If this occurs, investors may be required to file an amended U.S.

federal income tax return and to pay additional taxes plus deficiency interest.

USO may be liable for U.S.

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

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

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

If USO is required to pay any U.S.

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

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

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

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

The ability of a publicly traded partnership such as USO to elect this treatment is uncertain.

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

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

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

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

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

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

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

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

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

federal income tax purposes in any taxable year, rather than passing through its income, gains, losses, deduction and credits proportionately to its shareholders, USO would be subject to tax.

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

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

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

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

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

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

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

federal income tax purposes.

federal income tax is paid by USO on its income.

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

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

shareholder is required to report on its U.S.

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

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

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

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

In addition to U.S.

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

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

It is each shareholder’s responsibility to file the appropriate U.S.

federal, state, local and foreign tax returns.

If USO is required to withhold tax with respect to any non-U.S.

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

The impact of U.S.

tax reform on USO is uncertain.

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

The impact of changes in U.S.

federal income tax laws on USO is uncertain.

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

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

The rules dealing with U.S.

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Treasury Department.

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

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

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

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

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

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

OTC Contract Risk

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

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

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

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

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

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USO is not actively managed by conventional methods.

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

so, e.g., due to regulatory requirements or risk mitigation measures, or to avoid USO becoming leveraged, and it reinvests the proceeds in new Oil Futures Contracts or Other Oil-Related Investments to the extent possible.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In addition, any Director may be removed

by written consent of USCF Investments, Inc.

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

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

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

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

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

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

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

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

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

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

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This was the case in the Spring of 2020 as a result of the COVID-19 pandemic, related supply chain disruptions and ongoing disputes among oil-producing countries.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

oil or natural gas.

Political and other actors and their agents increasingly seek to advance climate change objectives

indirectly, such as by seeking to reduce the availability of or increase the cost for, financial and investment in the oil and gas sector and taking actions intended to promote changes in business strategy for oil and gas companies.

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

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

USO and USCF are subjects of class action litigation.

USO and USCF are subjects of class action, derivative and other litigation.

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

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

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

For more information, see “ Item 3.

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

What changed 10-K

Item 1A. Risk Factors