What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-27 compared with 2022-02-25 · 141 added, 162 removed, 446 unchanged (40% of the section changed)

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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.

capital markets and the global and U.S.

economy, the length and duration of the COVID-19 outbreak in the United States as well as worldwide and the magnitude of the economic impact of that outbreak, the effect of the COVID-19 pandemic on USO’s business prospects, including its ability to achieve its objectives, and the effect of the disruptions caused by the COVID-19 pandemic on our ability to continue to effectively manage our business.

and foreign currencies, market volatility in the crude oil markets and futures markets in part attributable to the COVID-19 pandemic in February 2020 and Russia’s invasion of Ukraine in February 2022.

Forward-looking statements, which involve assumptions and describe USO’s future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project,” the negative of these words, other variations on these words or comparable terminology.

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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 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.

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 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

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.

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

and risk mitigation measures taken, or that could be taken in the future, by one of USO’s FCMs.

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 had prior to the Spring of 2020.

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.

USO’s investment in Oil Futures Contracts in months other than the Benchmark Oil Futures Contract, other Oil Futures Contracts and Other Oil- Related Investments, 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.

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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.

Such volatility was attributable to the COVID-19 pandemic, related supply chain disruptions and ongoing disputes among oil-producing countries over the potential limits on the production of crude oil, and a corresponding collapse in demand for crude oil and a lack of on-land storage for crude oil.

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”).

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● 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.

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

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.

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● 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.

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 consistent with USO’s announced investment strategy.

USO cannot predict whether, or to what extent, any FCM may impose limitations on its holding certain positions in Oil Future Contracts at any time.

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 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.

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.

Commencement of investing in investments other than the Benchmark Futures Contract.

The foregoing events significantly limited USO’s 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.

During that time, USO had to invest 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, including the Benchmark Oil Futures Contract.

As a result, USO has and may be required to invest in other permitted investments including Other Oil-Related Investments, including OTC swaps, and may hold larger amounts of Treasuries, cash and cash equivalents, which could further impair USO’s ability to meet its investment objective.

USO continues to invest in other Oil Futures Contracts and Other Oil- Related Investments, which may impact USO’s ability to pursue its investment objective with the same high degree of success as it had prior to the Spring of 2020.

Current Investment Parameters.

As noted above, 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 the market and other events occurring in 2020 described herein, USO’s need to exercise this ability to make such investments had been limited.

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

The current 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.

The application of these parameters requires USO to exercise its discretion.

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

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:

Accordingly, for the foreseeable future, to address and comply with the market conditions (including liquidity requirements), regulatory requirements, risk mitigation measures 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”);

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

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.

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 (including liquidity requirements), regulatory requirements, risk mitigation measures, 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.

If, due to market conditions (including liquidity requirements), regulatory requirements, risk mitigation measures, 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.

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

USO also anticipates that to the extent it invests in Oil Futures Contracts other than WTI Oil Futures Contacts and Other Oil- Related Investments, it may enter into various non-exchange-traded derivative contracts to hedge the short-term price movements of such Oil Futures Contracts and Other Oil-Related Investments against the current Benchmark Oil Futures Contract.

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The investment intention announced by USO could change as a result of any or all of the following:

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 (e.g., swaps) that have better correlation with changes in price of the Benchmark Oil Futures Contract.

evolving market conditions (including 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, or that could be 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 (including 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 or other Oil Futures Contracts having an aggregate notional amount exactly equal to USO’s NAV.

For example, as standardized contracts, the Benchmark Oil Futures Contracts and other 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 and other Oil Futures Contracts 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.

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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 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.

As a result of market conditions and the regulatory response that occurred in the Spring of 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, and continues to invest, in Oil Futures Contracts in months other than the Benchmark Oil Futures Contracts as well as Other Oil Interests.

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, there can be no guarantee of when, if ever, that will occur.

In addition, because of the limitations imposed on USO for example, by its regulators and its FCMs, or other conditions, 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.

Investors in USO should expect USO’s ability to invest in the Benchmark Oil Futures Contract and other Oil Futures Contracts may be limited and USO may be required to invest in Other Oil-Related Investments.

[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.

USO’s investment in Oil Futures Contracts in months other than the Benchmark Oil Futures Contract, other Oil Futures Contracts and Other-Oil Related Investments, is intended to be temporary but may continue indefinitely if the developments resulting from 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.

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Regulatory Disclosure

Accountability Levels, Position Limits and Price Fluctuation Limits .

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

Below are certain key regulatory requirements that are, or may be, relevant to USO.

The various statements made in this summary are subject to modification by legislative action and changes in the rules and regulations of the SEC, Financial Industry Regulatory Authority (“FINRA”), CFTC, 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” in this annual report on Form 10-K.

Exchange Accountability Levels, Position Limits and Price Fluctuation Limits .

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

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

The daily price fluctuation limit establishes the maximum amount that the price of a futures

contract may vary either up or down from the previous day’s settlement price.

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

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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.

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.

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 other 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 other Related Public Funds.

If deemed necessary by the NYMEX and/or ICE Futures, USO could be ordered to reduce its Crude Oil Futures CL contracts to below the 10,000 single month and/or 20,000 all month accountability level.

USCF received letters from the CME on behalf of the NYMEX Market Regulation Department 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 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 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, 2022, USO held 21,034 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, 2021, including when it held a maximum of 73,956 Crude Oil Futures CL contracts on the NYMEX, exceeding the “any” month accountability limit.

USO exceeded accountability levels of the NYMEX during the year ended December 31, 2022, including when it held a maximum of 34,632 Crude Oil Futures CL contracts on the NYMEX, exceeding the “any” month limit.

No action was taken by the NYMEX and USO did not have to reduce the number of positions held.

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

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

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

For the year ended December 31, 2022, 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.

The foregoing accountability levels and position limits are subject to change.

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.

Futures Contracts and Position Limits

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.

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

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

The 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.

Due to evolving market conditions, remaining within relevant accountability levels and position limits, and, any additional or different risk mitigation measures taken by USO’s FCMs in the future 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.

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.

Federal Position Limits

In October 2020, the CFTC adopted a rule to establish 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”).

The limits for futures contracts are currently in effect;

the limits for economically equivalent swaps will become effective in 2023.

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.

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”).

The Final Margin Rules will subject non-cleared swaps and non-cleared security-based swaps between Covered Swap Entities and Swap Entities, and between Covered Swap Entities and financial end users that have material swaps exposure (i.e., an average daily aggregate notional of $8 billion or more in non-cleared swaps calculated in accordance with the Final Margin Rules), to a mandatory two-way minimum initial margin requirement.

The minimum amount of the initial margin required to be posted or collected would be either the amount calculated by the Covered Swap Entity using a standardized schedule set forth as an appendix to the Final Margin Rules, which provides the gross initial margin (as a percentage of total notional exposure) for certain asset classes, or an internal margin model of the Covered Swap Entity conforming to the requirements of the Final Margin Rules that is approved by the Agency having jurisdiction over the particular Covered Swap Entity.

The Final Margin Rules specify the types of collateral that may be posted or collected as initial margin for non-cleared swaps and non-cleared security-based swaps with financial end users (generally cash, certain government, government-sponsored enterprise securities, certain liquid debt, certain equity securities, certain eligible publicly traded debt, and gold);

and sets forth haircuts for certain collateral asset classes.

The Final Margin Rules require minimum variation margin to be exchanged daily for non-cleared swaps and non-cleared security-based swaps between Covered Swap Entities and Swap Entities and between Covered Swap Entities and all financial end-users (without regard to the swaps exposure of the particular financial end-user).

The minimum variation margin amount is the daily mark-to-market change in the value of the swap to the Covered Swap Entity, taking into account variation margin previously posted or collected.

For non-cleared swaps and security-based swaps between Covered Swap Entities and financial end-users, variation margin may be posted or collected in cash or non-cash collateral that is considered eligible for initial margin purposes.

Variation margin is not subject to segregation with an independent, third-party custodian, and may, if permitted by contract, be rehypothecated.

The initial margin requirements of the Final Margin Rules are being phased in over time, and the variation margin requirements of the Final Margin Rules are currently in effect.

USO is not a Covered Swap Entity under the Final Margin Rules, but it is a financial end-user.

Accordingly, USO is currently subject to the variation margin requirements of the Final Margin Rules.

However, USO does not have material swaps exposure and, accordingly, USO will not be subject to the initial margin requirements of the Final Margin Rules.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) required the CFTC and the SEC to adopt their own margin rules to apply to a limited number of registered swap dealers, security-based swap dealers, major swap participants, and major security-based swap participants that are not subject to the jurisdiction of one of the Agencies.

On December 16, 2015 the CFTC finalized its margin rules, which are substantially the same as the Final Margin Rules and have the same implementation timeline.

The SEC adopted margin rules for security-based swap dealers and major security-based swap participants on June 21, 2019.

The SEC’s margin rules are generally aligned with the Final Margin Rules and the CFTC’s margin rules, but they differ in a few key respects relating to timing for compliance and the manner in which initial margin must be segregated.

USO does not currently engage in security-based swap transactions and, therefore, the SEC’s margin rules are not expected to apply to USO.

Margin for OTC Swaps

Rules put in place by U.S.

federal banking regulators, the CFTC and the SEC require the daily exchange of variation margin and initial margin for swaps between swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants (“Swap Entities”) and swaps between Swap Entities and their counterparties that are “financial end-users” (such rules, the “Margin Rules”).

The Margin Rules require Swap Entities to exchange variation margin with all of their counterparties who are financial end-users.

The minimum variation margin amount is the daily mark-to-market change in the value of the swap, taking into account the amount of variation margin previously posted or collected.

Swap Entities are required to exchange initial margin with their financial end-users who have “material swaps exposure” (i.e., an average daily aggregate notional of $8 billion or more in non-cleared swaps calculated in accordance with the Margin Rules).

The Margin Rules specify the types of collateral that may be posted or collected as initial margin or variation margin (generally cash, certain government, government-sponsored enterprise securities, certain liquid debt, certain equity securities, certain eligible publicly traded debt, and gold) and sets forth haircuts for certain collateral asset classes.

USO is not a Swap Entity under the Margin Rules, but it is a financial end-user.

Accordingly, USO will be subject to the variation margin requirements of the Margin Rules for any swaps that it enters into.

However, USO does not have material swaps exposure and, accordingly, USO will not be subject to the initial margin requirements of the Margin Rules.

Mandatory Trading and Clearing of Swaps

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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

and variation margin requirements are set by the relevant clearing organization, subject to certain regulatory requirements and guidelines.

Additional margin may be required and held by USO’s FCM.

If a swap is required to be cleared, initial and variation margin requirements are set by the relevant clearing organization, subject to certain regulatory requirements and guidelines.

Additional margin may be required and held by USO’s FCMs.

Other Requirements for Swaps

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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”).

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

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

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

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

Although such government 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.

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 28 loss.

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

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.

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

USO invests in government money market funds.

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

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

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

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

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

Due to fluctuations in interest rates, the market value of securities

held by a government money market fund may vary.

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

Price Movements

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The price of the Benchmark Oil Futures Contract started the year at $75.21 per barrel.

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 high of the year was on March 8, 2022 when the price reached $121.68 per barrel.

The low for the year was on December 9, 2022, which was $71.13 per barrel.

The year ended with the Benchmark Oil Futures Contract at $80.26 per barrel, an increase of approximately 6.71% over the year.

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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.”

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.

During the year ended December 31, 2022, the crude oil futures market experienced states of both 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.

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Unlike funds that are registered under the 1940 Act, shares that have been redeemed by USO cannot be resold by USO.

As a result, USO contemplates that additional offerings of its shares will be registered with the SEC in the future in anticipation of additional issuances and redemptions.

As a result, USO contemplates that additional offerings of its shares may be registered with the SEC in the future in anticipation of additional issuances and redemptions.

As of December 31, 2022, 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 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.

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., Nomura Securities International Inc., RBC Capital Markets LLC, SG Americas Securities LLC, UBS Securities LLC and Virtu Americas LLC.

For the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

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The fee is accrued daily and paid monthly.

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.

As a result, the amount of income earned by USO as a percentage of average daily total net assets was lower during the year ended December 31, 2021, compared to the year ended December 31, 2020.

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, 2021, compared to the year ended December 31, 2020 was due primarily to an increase in tax reporting and professional fees.

The increase in the per share NAV for the year ended December 31, 2022, compared to the year ended December 31, 2021, was due primarily to higher prices for WTI crude oil and the related increase in the value of the Oil Futures Contracts and other Oil Interests in which USO held and traded.

Average interest rates earned on short-term investments held by USO, including cash, cash equivalents and Treasuries, were higher during the year ended December 31, 2022, compared to the year ended December 31, 2021.

As a result, the amount of income earned by USO as a percentage of average daily total net assets was higher during the year ended December 31, 2022, compared to the year ended December 31, 2021.

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

The decrease in total fees and other expenses excluding management fees for the year ended December 31, 2022, compared to the year ended December 31, 2021 was due primarily to decrease in tax reporting and professional fees.

The decrease in total commissions accrued to brokers for the year ended December 31, 2022, compared to the year ended December 31, 2021, was due primarily to a lower number of Oil Futures Contracts being held and traded.

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For the 30-valuation days ended December 31, 2022, the average daily change in the Benchmark Oil Futures Contract was (0.172)%, while the average daily change in the per share NAV of USO over the same time period was (0.083)%.

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

was 0.089% (or 8.9 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.

Since the commencement of the offering of USO’s shares to the public on April 10, 2006 to December 31, 2022, the average daily change in the Benchmark Oil Futures Contract was 0.001%, while the average daily change in the per share NAV of USO over the same time period was (0.015)%.

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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.

The impact of these expenses, offset by interest and dividend income, and net of positive or negative execution, and net the difference in returns between USO’s current holdings and the Benchmark Futures contract 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.

By comparison, for the year ended December 31, 2021, the actual total return of USO as measured by changes in its per share NAV was 63.83%.

This was based on an initial per share NAV of 102.27* as of December 31, 2019 and an ending per share NAV as of December 31, 2020 of $33.07.

This is based on an initial per share NAV of $33.07 as of December 31, 2020 and an ending per share NAV as of December 31, 2021 of $54.18.

During this time period, USO made no distributions to its shareholders.

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.

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

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

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 or higher than daily changes in the price of the Benchmark Oil Futures Contract.

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.

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).

As a result, investors in USO should expect that USO will continue to invest in other permitted investments and that there have been and could be 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.

During the fourth quarter of 2022 the rolling 30 day average daily difference between the return of USO’s NAV and the Benchmark Futures Contract was 0.089% (or 8.9 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.

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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 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.

As such, USCF anticipates that USO could possibly underperform its benchmark so long as interest earned is less than the fees and expenses paid by USO.

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

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

As such, USCF anticipates that USO could possibly outperform its benchmark so long as interest earned is higher than the fees and expenses paid by USO.

Third, USO may hold Other Oil-Related Investments in its portfolio that may fail to closely track the Benchmark Oil Futures Contract’s total return movements.

In that case, the error in tracking the Benchmark Oil Futures Contract could result in daily changes in the per share NAV of USO that are either too high, or too low, relative to the daily changes in the Benchmark Oil Futures Contract.

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, such as OTC swaps, which may have the effect of increasing transaction related expenses and may result in increased tracking error.

During the year ended December 31, 2022, USO held OTC swaps, which are considered 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 additional 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.

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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

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.

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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, related supply chain disruptions and disputes among oil producing countries over the potential limits on the production of crude oil, and a corresponding collapse in demand for crude oil and a lack of on-land storage for crude oil.

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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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.

fall further.

supply fall further.

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

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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.

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

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

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

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

During the fourth quarter of 2022, crude oil prices exhibited multiple reversals, in contrast to strong gains during the first half of the year and a steady decline during the third quarter of 2022.

In 2022, U.S.

production rose to a peak of 12.2 mbd while OPEC production peaked at 29.95 mbd.

Despite increased demand and tighter supply (the U.S., Russia, and OPEC have still not returned to pre-pandemic production levels), bearish factors weighed on crude prices during the second half of 2022, including a record drawdown in the United States Strategic Petroleum Reserve, OPEC supply cuts, consumer responses to inflation, rising interest rates, a strong dollar, and

concerns about global economic growth.

These factors continue to affect crude prices.

Conversely, the ongoing demand recovery for crude oil during a time when supply is lower could lead to higher prices over time.

Supply constraints, worker shortages, infrastructure and manufacturing energy usage, the war in Ukraine, and other geopolitical tensions, are factors that could contribute to future increases in crude oil prices.

Between competing bullish and bearish factors, crude could stay range bound or could exhibit significant movement up or down over the next few quarters.

The war in Ukraine and the potential for further supply disruptions and sanctions could lead to further volatility.

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

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

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, 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

Crude Oil - 10 Years

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, 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

Crude Oil - 1 Year

Correlation Matrix 1 Year

Equities (S&P 500)

(BEUSG4 Index)

(FTSE World Index)

Large Cap US Equities (S&P 500)

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Income received from USO’s investments in money market funds and Treasuries is paid to USO.

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, 2022, USO’s expenses did not 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, 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.

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

During the year ended December 31, 2022, USO did not use other assets to pay expenses, post expense waiver.

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

USCF endeavors to have the value of USO’s Treasuries, cash and cash equivalents, whether held by USO or posted as margin or other collateral, at all times approximate the aggregate market value of its obligations for its investments in Oil Interests.

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

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

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

During the year ended December 31, 2022, 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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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.

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

USO may purchase OTC swaps in the future periods, see “Item 3.

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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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.

USCF and USO have also entered into a licensing agreement with the NYMEX pursuant to which USO and the other 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.

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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