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USO seeks to achieve its investment objective by investing so that the average daily percentage change in USO’s NAV for any period of 30 successive valuation days will be within plus/minus ten percent (10%) of the average daily percentage change in the price of the Benchmark Oil Futures Contract over the same period.
−Removed: USO’s investment strategy is designed to provide investors with a cost-effective way to invest indirectly in crude oil and to hedge against movements in the spot price of light, sweet crude oil.
−Removed: As a result of market conditions and regulatory limitations arising during the COVID-19 pandemic and the state of the crude oil markets in general, including significant market volatility and applicable regulatory accountability levels and position limits on oil futures contracts and risk mitigation measures that were imposed on USO in 2020, USO has invested in Oil Futures Contracts in months other than the Benchmark Oil Futures Contract.
−Removed: The foregoing has impacted the performance of USO and its ability meet its investment objective, including that USO has not been able to meet its investment objective as favorably as it has in the past.
−Removed: USO’s limited ability to invest in the Benchmark Oil Futures Contract and its need to invest in other Oil Futures Contracts as well as Other Oil-Related Investments, was originally intended to be temporary but may continue indefinitely.
+Added: As a result, investors should be aware that USO would meet its investment objective even if there are significant deviations between changes in its daily NAV and changes in the daily price of the Benchmark Oil Futures Contract provided that the average daily percentage change in USO’s NAV over 30 successive valuation days is 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.
+Added: USO is currently invested in Oil Futures Contracts in months other than the Benchmark Oil Futures Contract.
+Added: This 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.
+Added: Following the significant market volatility that occurred in the Spring of 2020 and the market conditions, regulatory requirements and risk mitigation measures taken by USO and USO’s FCM that impacted USO as a result thereof, USO previously disclosed the parameters for making decisions regarding the permitted investments USO would hold, including the intended order of priority in selecting investments and the type of investments to be held in its portfolio.
+Added: Beginning with the monthly roll in September 2023 and ending with the monthly roll in January 2024, USO’s intention is to begin transitioning its investment portfolio so that it will primarily invest in Benchmark Oil Futures Contracts, consistent with USO’s investment strategy prior to the Spring of 2020.
+Added: However, USO has had, and will continue to have, the ability to invest in Oil Futures Contracts beyond the Benchmark Oil Futures Contract and Other Oil-Related Investments, such as OTC swaps, and USO may make such investments if market conditions, regulatory requirements, risk mitigation measures (including those that may be taken by USO, USO’s FCMs, counterparties or other market participants), liquidity requirements, or other factors require USO to do so in order to meet its investment objective.
+Added: USO may invest in Oil Futures Contracts beyond the Benchmark Oil Futures Contract, and/or Other Oil-Related Investments, as a result or in response to any of the foregoing factors.
+Added: USO will continue to disclose its end of day portfolio on its website, www.uscfinvestments.com.
+Added: The end of day portfolio disclosed on USO’s website would reflect any investments in Oil Futures Contracts beyond the Benchmark Oil Futures Contract, and/or Other Oil-Related Investments made in light of market conditions, regulatory requirements, risk mitigation measures (including those that may be taken by USO, USO’s FCMs, counterparties or other market participants), liquidity requirements, or other factors.
+Added: Independent of the USO website, USO may make available portfolio holdings information to Authorized Participants that reflects the Fund’s anticipated holdings on the following business day.
An investment in USO involves investment risk similar to a direct investment in Oil Futures Contracts and Other Oil-Related Investments but it is not a proxy for investing in the oil markets.
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The demand for crude oil correlates closely with general economic growth rates.
−Removed: 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.
−Removed: 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.
+Added: The occurrence of recessions or other periods of low or negative economic growth will typically have a direct adverse impact on crude oil demand and, therefore, may have an adverse impact on crude oil prices.
+Added: 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 crude oil.
Sovereign debt downgrades, defaults, inability to access debt markets due to credit or legal constraints, liquidity crises, the breakup or restructuring of fiscal, monetary, or political systems such as the European Union, and other events or conditions (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.
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increased competitiveness of alternative energy sources that have so far generally not been competitive with oil without the benefit of government subsidies or mandates;
−Removed: and changes in technology or consumer preferences that alter fuel choices, such as toward alternative fueled vehicles.
+Added: and changes in technology or consumer preferences that alter fuel choices, such as toward alternative fueled vehicles or electric transportation and broad-based changes in personal income levels.
Other crude oil supply-related factors.
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Similarly, increases in industry refining or petrochemical manufacturing capacity may impact the supply of crude oil.
−Removed: 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.
+Added: 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 risks 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.
−Removed: Significant market volatility has recently occurred in the commodities markets.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Significant market volatility has recently occurred in the commodities markets and the oil futures markets.
+Added: Such volatility is attributable in part to the COVID-19 pandemic, related supply chain disruptions, war, including the war between Russia and Ukraine, and continuing disputes among oil-producing countries.
+Added: 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 Benchmark Oil Futures Contract.
+Added: 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 Oil-Related Investments, such as OTC swaps.
+Added: 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 may lead 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.
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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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: COVID-19 and other infectious disease outbreaks could negatively affect the valuation and performance of USO’s investments.
+Added: 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, financial services, energy, metals and mining, engineering and defense and defense-related materials sectors.
+Added: 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 energy, including energy futures, and the NAV or share price of USO.
+Added: 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 the availability of certain commodities, commodity and futures prices and the supply chain globally.
+Added: The longer-term impact on commodities and futures prices, including the price of the Benchmark Oil Futures Contract, is difficult to predict and depends on a number of factors that may have a negative impact on USO in the future.
+Added: Infectious disease outbreaks like COVID-19 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 spread globally.
In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The impact of COVID-19, and other infectious disease outbreaks that may arise in the future, could adversely affect individual issuers and capital markets in ways that cannot necessarily be foreseen.
−Removed: In addition, actions taken by government and quasi-governmental authorities and regulators throughout the world in response to the COVID-19 outbreak, including significant fiscal and monetary policy changes, may affect the value, volatility, pricing and liquidity of some investments or other assets, including those held by or invested in by USO.
−Removed: Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally.
−Removed: The duration of the COVID-19 outbreak and its ultimate impact on USO and, on the global economy, cannot be determined with certainty.
+Added: COVID-19 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.
+Added: The spread of COVID-19 had 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 were impacted by the outbreak and government and other measures seeking to contain its spread.
+Added: COVID-19 had 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 had a significant adverse effect on the prices of Oil Futures Contracts, including the Benchmark Oil Futures Contract and Other Oil-Related Investments.
+Added: Infectious disease outbreaks like COVID-19 may arise in the future and could adversely affect individual issuers and capital markets in ways that cannot necessarily be foreseen.
+Added: In addition, actions taken by government and quasi-governmental authorities and regulators throughout the world in response to such an outbreak, including the potential for significant fiscal and monetary policy changes, may affect the value, volatility, pricing and liquidity of some investments or other assets, including those held by or invested in by USO.
+Added: Public health crises caused by infectious disease outbreaks may exacerbate other pre-existing political, social and economic risks in certain countries or globally and their duration cannot be determined with certainty.
Historical performance of USO and the Benchmark Oil Futures Contract is not indicative of future performance.
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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.
−Removed: Investing in USO's shares for hedging purposes involves the following risks:
+Added: Investing in USO’s shares for hedging purposes includes the following risks:
● The market price at which the investor buys or sells shares may be significantly less or more than NAV.
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The public trading price at which an investor buys or sells shares during the day from their broker may be different from the NAV of the shares, which is also the price shares can be redeemed with USO by Authorized Participants in Redemption Baskets.
−Removed: Generally, price differences may relate primarily to supply and demand forces at work in the secondary trading market for shares that are closely related to, but not identical to, the same forces influencing the prices of light, sweet crude oil and the Benchmark Oil Futures Contracts at any point in time.
+Added: Generally, price differences may relate primarily to supply and demand forces at work in the secondary trading market for shares that are closely related to, but not identical to, the same forces influencing the prices of light, sweet crude oil and the Benchmark Oil Futures Contract at any point in time.
USCF expects that exploitation of certain arbitrage opportunities by Authorized Participants and their clients will tend to cause the public trading price to track NAV per share closely over time, but there can be no assurance of that.
−Removed: For example, a shortage of USO’s shares in the market and other factors could cause USO’s shares to trade at a premium.
+Added: For example, a shortage of USO shares in the market and other factors could cause USO’s shares to trade at a premium.
Investors should be aware that such premiums can be transitory.
To the extent an investor purchases shares that include a premium (e.g., because of a shortage of shares in the market due to the inability of Authorized Participants to purchase additional shares from USO that could be resold into the market) and the cause of the premium no longer exists causing the premium to disappear (e.g., because more shares are available for purchase from USO by Authorized Participants that could be resold into the market) such investor’s return on its investment would be adversely impacted due to the loss of the premium.
−Removed: See the risk factor, An unanticipated number of Creation Basket requests during a short period of time could result in a shortage of shares , below.
The NAV of USO’s shares may also be influenced by non-concurrent trading hours between the NYSE Arca and the various futures exchanges on which light, sweet crude oil is traded.
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As a result, during periods when the NYSE Arca is open and the futures exchanges on which light, sweet crude oil is traded are closed, trading spreads and the resulting premium or discount on the shares may widen and, therefore, increase the difference between the price of the shares and the NAV of the shares.
−Removed: Daily percentage changes in USO’s NAV may not correlate with daily percentage changes in the price of the Benchmark Oil Futures Contracts.
+Added: Daily percentage changes in USO’s NAV may not correlate with daily percentage changes in the price of the Benchmark Oil Futures Contract.
It is possible that the daily percentage changes in USO’s NAV per share may not closely correlate to daily percentage changes in the price of the Benchmark Oil Futures Contract.
Non-correlation may be attributable to disruptions in the market for light, sweet crude oil, the imposition of position or accountability limits by regulators or exchanges, or other extraordinary circumstances.
−Removed: As USO approaches or reaches position limits with respect to the Benchmark Oil Futures Contract and other Oil Futures Contracts or in view of market conditions, USO may invest in Oil Futures Contracts other than the Benchmark Oil Futures Contract and Other Oil-Related Investments.
+Added: As USO approaches or reaches position limits with respect to the Benchmark Oil Futures Contract and other Oil Futures Contracts or in view of market conditions, regulatory requirements, risk mitigation measures (including those that may be taken by USO, USO’s FCMs, counterparties or other market participants) and other conditions as described herein, USO has and may invest in Oil Futures Contracts other than the Benchmark Oil Futures Contact and Other Oil-Related Investments which may cause less correlation with daily percentage changes in the price of the Benchmark Oil Futures Contract than investments in the Benchmark Oil Futures Contract.
In addition, USO is not able to replicate exactly the changes in the price of the Benchmark Oil Futures Contract because the total return generated by USO is reduced by expenses and transaction costs, including those incurred in connection with USO’s trading activities, and increased by interest income from USO’s holdings of Treasuries (defined below).
−Removed: 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.
−Removed: 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.
+Added: The correlation between changes in price 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.
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Natural forces in the oil futures market known as “backwardation” and “contango” may increase USO’s tracking error and/or negatively impact total return.
−Removed: The design of USO’s Benchmark Oil Futures Contract is such that every month it begins by using the near month contract to expire until the near month contract is within two weeks of expiration, when, over a ten-day period, it transitions to the next month contract to expire as its benchmark contract and keeps that contract as its benchmark until it becomes the near month contract and close to expiration.
+Added: USO’s Benchmark Oil Futures Contract is the near month contract to expire until the near month contract approaches expiration when, over a ten-day period beginning on the first business day of each month, the Benchmark Oil Futures Contract transitions to the next month contract to expire and remains that contract until the next roll period.
+Added: Between roll periods, the near month contract expires and the next near month contract becomes the near month.
In the event of a crude oil futures market where near month contracts trade at a higher price than next month to expire contracts, a situation described as “backwardation” in the futures market, then absent the impact of the overall movement in light, sweet crude oil prices the value of the benchmark contract would tend to rise as it approaches expiration.
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While contango and backwardation are consistently present in trading in the futures markets, such conditions can be exacerbated by market forces.
−Removed: For example, extraordinary market conditions in the crude oil markets, including “super contango” (a higher level of contango arising from the overabundance of oil being produced and the limited availability of storage for such excess supply), occurred in the crude oil futures markets in 2020 due to over-supply of crude oil in the face of weak demand during the COVID-19 pandemic when disputes among oil-producing countries regarding limitations on the production of oil also were occurring.
−Removed: As a result of market and regulatory conditions, including significant market volatility, large numbers of USO shares purchased during a short period of time, and applicable regulatory accountability levels and position limits on oil futures contracts that were imposed on USO, in 2020 USO invested in, and continues to invest in, Oil Futures Contracts with expiration dates for months later than that of the Benchmark Oil Futures Contract.
−Removed: Holdings in these later month contracts will typically cause USO to experience lesser effects from contango and backwardation than would be the case if USO’s holdings were primarily in oil futures contracts in the first month or second month.
+Added: For example, extraordinary market conditions in the crude oil markets, including “super contango” (a higher level of contango arising from the overabundance of oil being produced and the limited availability of storage for such excess supply), occurred in the crude oil futures markets in April 2020 due to over-supply of crude oil in the face of weak demand during the COVID-19 pandemic when disputes among oil-producing countries regarding limitations on the production of oil also were occurring.
+Added: As a result of market and regulatory conditions, including significant market volatility, large numbers of USO shares purchased during a short period of time, applicable regulatory accountability levels and position limits on oil futures contracts and risk mitigation measures that were taken by USO and USO’s FCM in 2020, USO invested in, and continues to invest in, Oil Futures Contracts with expiration dates for months later than that of the Benchmark Oil Futures Contract.
+Added: Holdings in later month contracts will typically cause USO to experience lesser effects from contango and backwardation than would be the case if USO’s holdings were primarily in oil futures contracts in the first month or second month.
+Added: While USO continues to invest in later month contracts, when USO’s futures portfolio returns to being primarily invested in the Benchmark Oil Futures Contract (beginning in September 2023), it will be subject to greater effects of contango and backwardation.
When compared to total return of other price indices, such as the spot price of crude oil, the impact of backwardation and contango may cause the total return of USO’s per share NAV to vary significantly.
Moreover, absent the impact of rising or falling oil prices, a prolonged period of contango could have a significant negative impact on USO’s per share NAV and total return and investors could lose part or all of their investment.
−Removed: 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.
−Removed: Accountability levels, position limits, and daily price fluctuation limits set by the exchanges have the potential to cause tracking error, by limiting USO’s investments, including its ability to fully invest in the Benchmark Oil Futures Contract, which could cause the price of shares to substantially vary from the price of the Benchmark Oil Futures Contracts.
+Added: Accountability levels, position limits, and daily price fluctuation limits set by the exchanges have the potential to cause tracking error, by limiting USO’s investments, including its ability to fully invest in the Benchmark Oil Futures Contract, which means that changes in the price of shares could substantially vary from the changes in the price of the Benchmark Oil Futures Contract.
Designated contract markets, such as the NYMEX and ICE Futures, have established accountability levels and position limits on the maximum net long or net short futures contracts in commodity interests that any person or group of persons under common trading control (other than as a hedge, which an investment by USO is not) may hold, own or control.
These levels and position limits apply to the futures contracts that USO invests in to meet its investment objective.
−Removed: In addition to accountability levels and position limits, the
−Removed: NYMEX and ICE Futures also set daily price limits on futures contracts.
+Added: In addition to accountability levels and position limits, the NYMEX and ICE Futures may also set daily price limits on futures contracts.
The daily price fluctuation limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day’s settlement price.
Once the daily price fluctuation limit has been reached in a particular futures contract, no trades may be made at a price beyond that limit.
−Removed: The accountability levels for the Benchmark Oil Futures Contract and other Oil Futures Contracts traded on U.S.-based futures exchanges, are not a fixed ceiling, but rather a threshold above which the exchange may exercise greater scrutiny and control over an investor’s positions.
+Added: The accountability levels for the Benchmark Oil Futures Contract and other Oil Futures Contracts traded on U.S.-based futures exchanges, such as the NYMEX, are not a fixed ceiling, but rather a threshold above which the NYMEX may exercise greater scrutiny and control over an investor’s positions.
The NYMEX current accountability level for investments for any one-month in the Benchmark Oil Futures Contract is 10,000 contracts.
In addition, the NYMEX imposes an accountability level for all months of 20,000 net futures contracts for light, sweet crude oil.
−Removed: In addition, the ICE Futures Europe maintains the same accountability levels, position limits and monitoring authority for its light, sweet crude oil contract as the NYMEX.
+Added: In addition, the ICE Futures Europe maintains the same accountability levels, position limits and monitoring authority for its futures contracts for light, sweet crude oil contract as the NYMEX.
If USO and the Related Public Funds exceed these accountability levels for investments in the futures contracts for light, sweet crude oil, the NYMEX and ICE Futures Europe will monitor such exposure and may ask for further information on their activities, including the total size of all positions, investment and trading strategy, and the extent of liquidity resources of USO and the Related Public Funds.
−Removed: If deemed necessary by the NYMEX and/or ICE Futures Europe, USO could be ordered to reduce or maintain the level of its futures contracts traded on such exchanges to below the 10,000 single month and/or 20,000 all month accountability level.
+Added: If deemed necessary by the NYMEX and/or ICE Futures Europe, USO could be ordered to reduce its net futures contracts back to the accountability level.
Position limits differ from accountability levels in that they represent fixed limits on the maximum number of futures contracts that any person may hold and cannot be exceeded without express CFTC authority to do so.
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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.
−Removed: On October 15, 2020, the CFTC approved the Position Limits Rule.
−Removed: 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.
+Added: Part 150 of the CFTC’s regulations (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 that all market participants must comply with, with certain exemptions.
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.
−Removed: 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.
−Removed: Risk mitigation measures imposed by USO’s FCMs have the potential to cause tracking error by limiting USO’s investments, including its ability to fully invest in the Benchmark Oil Futures Contract and other Oil Futures Contracts, which could cause the price of USO’s shares to substantially vary from the price of the Benchmark Oil Futures Contract.
−Removed: USO’s FCMs have imposed and may impose limits on the positions that USO may hold in the Benchmark Oil Futures Contracts as well as certain other months that constrain USO’s ability to invest in the Benchmark Oil Futures Contract and other Oil Futures Contracts.
−Removed: In particular, RBC expressly informed USO that it may not hold positions in the June Benchmark Oil Futures Contract expiring on May 19, 2020.
−Removed: At the time it imposed this restriction, RBC continued to trade and clear other Oil Futures Contracts for USO, including in connection with rolls and rebalances of its portfolio.
−Removed: At that time, RBC advised USO that, going forward, it may only purchase additional Benchmark Oil Futures Contracts and other Oil Futures Contracts through RBC for rolls and rebalances of USO’s portfolio and not as investments for the proceeds of new Creation Baskets.
+Added: Accordingly, the Position Limits Rule could inhibit USO’s ability to invest in the Benchmark Oil Futures Contract and thereby could negatively impact the ability of USO to meet its investment objective.
+Added: USO has not limited the size of its offering and is committed to utilizing substantially all of its proceeds to purchase Oil Futures Contracts and Other Oil-Related Investments.
+Added: If USO encounters accountability levels, position limits (including those set by the Position Limits Rule), or price fluctuation limits for Oil Futures Contracts on the NYMEX or ICE Futures, it may then, if permitted under applicable regulatory requirements, purchase Oil Futures Contracts on other exchanges that trade listed crude oil futures or enter into swaps or other permitted investments to meet its investment objective.
+Added: In addition, if USO exceeds accountability levels on either the NYMEX or ICE Futures and is required by such exchanges to reduce its holdings, such reduction could potentially cause a tracking error between the price of USO’s shares and the price of the Benchmark Oil Futures Contract.
+Added: Risk mitigation measures imposed by USO’s FCMs have the potential to cause tracking error by limiting USO’s investments, including its ability to fully invest in the Benchmark Oil Futures Contract and other Oil Futures Contracts, which means that the changes in the price of USO’s shares could substantially vary from changes in the price of the Benchmark Oil Futures Contract.
+Added: USO’s FCMs have in the past imposed, and may in the future impose, limits on the positions that USO may hold in the Benchmark Oil Futures Contract as well as certain other months that constrain USO’s ability to invest in the Benchmark Oil Futures Contract and other Oil Futures Contracts.
+Added: For example, in the Spring of 2020, RBC Capital Markets, LLC (“RBC”) expressly informed USO that USO could not hold positions in the June Benchmark Oil Futures Contract expiring on May 19, 2020.
+Added: At the time RBC imposed this restriction, RBC continued to trade and clear other Oil Futures Contracts for USO, including in connection with rolls and rebalances of its portfolio.
+Added: At that time, RBC advised USO that, going forward, USO may only purchase additional Benchmark Oil Futures Contracts and other Oil Futures Contracts through RBC for rolls and rebalances of USO’s portfolio and not as investments for the proceeds of new Creation Baskets.
The limits imposed by RBC on holdings in USO’s portfolio applied regardless of whether the Oil Futures Contracts purchased would be within the accountability levels and position limits permitted by NYMEX and ICE.
−Removed: RBC has since informed USO that USO may resume repurchasing Oil Futures Contracts for investment of the proceeds from Creation Baskets.
−Removed: USO entered into an agreement with each of RCG, MCM and MFUSA on May 28, 2020, June 5, 2020 and December 3, 2020, respectively, to become additional FCMs for USO.
−Removed: Neither RCG, MCM nor MFUSA has precluded USO from purchasing, holding, or reinvesting the proceeds from the purchases of Creation Baskets in Oil Futures Contracts, including the Benchmark Oil Futures Contract.
−Removed: 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.
−Removed: USO cannot predict with any certainty when and whether RBC will remove its limitations on holding certain positions in Oil Futures Contracts, or whether, or to what extent, any such limits may be imposed by any other FCM in the future.
−Removed: USO is in ongoing discussions with other FCMs and it cannot predict when it will enter into such agreements.
−Removed: 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.
−Removed: 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
−Removed: rebalance and adjust the types of holdings in its portfolio than in the past.
−Removed: The foregoing may inhibit USO from pursuing its investment objective in the same manner in the future.
−Removed: 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.
−Removed: 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.
+Added: Since then, RBC allowed USO to resume purchasing Oil Futures Contracts, including the Benchmark Oil Futures Contract, for investment of the proceeds from Creation Baskets.
+Added: USO entered into an agreement with each of Marex North America, LLC, formerly RCG Division of Marex Spectron (“MNA”), E D & F Man Capital Markets Inc.
+Added: (“MCM”), Macquarie Futures USA LLC (“MFUSA”), and ADM Investor Services, Inc.
+Added: (“ADMIS”) on May 28, 2020, June 5, 2020, December 3, 2020 and August 8, 2023, respectively, to become additional FCMs for USO, none of which have 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.
+Added: However, limits could be imposed by any of USO’s FCMs that limit USO’s ability to have a substantial portion of its assets invested in the Benchmark Oil Futures Contract.
+Added: USO cannot predict with any certainty whether, or to what extent, any limitations may be imposed on USO by any FCM in the future.
+Added: In addition, when offering Creation Baskets for purchase, limitations imposed by exchanges and/or any of USO’s 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.
+Added: If this were the case, when selling Creation Baskets, USO may invest in other permitted investments, including Other Oil-Related Investments, and may hold larger amounts of Treasuries, cash and cash equivalents, which could 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.
2 unchanged sentences
Investors will be required to pay U.S.
−Removed: 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.
+Added: 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 or value of any such 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 with respect to such shares.
−Removed: An investor’s allocable share of taxable income or loss may differ from its economic income or loss on its shares.
−Removed: 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.
+Added: An investor’s allocable share of taxable income or loss may differ from economic income or loss on the shares.
+Added: 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 economic profit or loss from the 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.
2 unchanged sentences
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.
−Removed: federal income tax rules pertaining to entities treated as partnerships for U.S.
−Removed: federal income tax purposes are complex and their application to large, publicly traded partnerships such as USO is in many respects uncertain.
+Added: federal income tax rules pertaining to partnerships 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.
−Removed: 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.
+Added: It is possible that the IRS could successfully challenge the application by USO of these assumptions and conventions as not fully complying with all aspects of the Internal Revenue Code of 1986, as amended (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.
−Removed: federal income tax return and to pay additional taxes plus deficiency interest.
+Added: federal income tax return and to pay additional taxes, plus deficiency interest, and may be subject to penalties.
USO may be liable for U.S.
−Removed: federal income tax on any “imputed understatement” of tax resulting from an adjustment as a result of an IRS audit.
−Removed: 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.
+Added: federal income tax on any “imputed underpayment” of tax resulting from an adjustment as a result of an IRS audit.
+Added: The amount of the imputed underpayment 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 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.
−Removed: 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.
−Removed: 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.
+Added: federal income taxes on any imputed underpayment, the resulting tax liability would reduce the net assets of USO and would likely have an adverse impact on the value of the shares.
+Added: Under certain circumstances, USO may be eligible to make an election to cause the investors to take into account the amount of any imputed underpayment, including any associated interest and penalties.
The ability of a publicly traded partnership such as USO to elect this treatment is uncertain.
5 unchanged sentences
federal income tax laws, USO will be treated as a partnership that is not taxable as a corporation for U.S.
−Removed: federal income tax purposes, provided that (i) at least 90 percent of USO’s annual gross income will be derived from (a) income and gains from commodities (not held as inventory) or futures, forwards, options, swaps and other notional principal contracts with respect to commodities, and (b) interest income, (ii) USO is organized and operated in accordance with its governing agreements and applicable law and (iii) USO does not elect to be taxed as a corporation for U.S.
+Added: federal income tax purposes, provided that (i) at least 90 percent of USO’s annual gross income will be derived from (a) income and gains from commodities (not held as inventory) or futures, forwards, options, swaps and other notional principal contracts with respect to commodities, and (b) interest income;
+Added: (ii) USO is organized and operated in accordance with its governing agreements and applicable law;
+Added: and (iii) USO does not elect to be taxed as a corporation for U.S.
federal income tax purposes.
−Removed: Although USCF anticipates that USO has satisfied and will continue to satisfy the “qualifying income” requirement for all of its taxable years, that result cannot be assured.
−Removed: USO has not requested and will not request any ruling from the IRS with respect to its classification as a partnership not taxable as a corporation for U.S.
+Added: Although USCF anticipates that USO has satisfied and will continue to satisfy the “qualifying income” requirement for all taxable years, that result cannot be assured.
+Added: USO has not requested and will not request any ruling from the IRS with respect to its classification as a partnership for U.S.
federal income tax purposes.
If the IRS were to successfully assert that USO is taxable as a corporation for U.S.
−Removed: 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.
−Removed: federal income imposed at applicable corporate rates on its net income for the year.
−Removed: 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.
−Removed: 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.
+Added: federal income tax purposes in any taxable year, rather than passing through its income, gains, losses, deductions, and credits proportionately to its shareholders, USO would be subject to U.S.
+Added: federal income tax imposed at the corporate flat rate of 21% on its net income for the year.
+Added: In addition, although USCF does not currently intend to make distributions with respect to shares, if USO were treated as a corporation for U.S.
+Added: federal income tax purposes, any distributions made with respect to USO shares 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.
−Removed: 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.
+Added: USO is organized and operated as a limited partnership in accordance with the provisions of the LP Agreement and applicable state law, and is treated as a partnership for U.S.
federal income tax purposes.
federal income tax is paid by USO on its income.
−Removed: 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.
+Added: Instead, USO will furnish shareholders each year with tax information on IRS Schedules K-1 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, deduction, and credit of USO.
−Removed: 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.
+Added: These amounts must be reported without regard to the amount of cash or value of property the shareholder receives (if any) 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.
+Added: In addition to U.S.
+Added: 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.
+Added: Although an analysis of those various taxes is not presented here, each prospective shareholder should consider their potential impact on its investment in USO.
+Added: It is each shareholder’s responsibility to file the appropriate U.S.
+Added: 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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On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the “IRA”) into law.
−Removed: At this time, we cannot predict with certainty how the provisions of the IRA might affect USO, its investors, or USO’s investments.
+Added: At this time, we cannot predict with certainty how the tax provisions of the IRA or any other proposed or future tax legislation might affect USO, its investors, or USO’s 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 shares.
10 unchanged sentences
USO may obtain only limited recovery or may obtain no recovery in such circumstances.
+Added: USO has mitigated these risks by typically entering into transactions only with major global financial institutions.
Valuing OTC derivatives may be less certain than actively traded financial instruments.
2 unchanged sentences
As a result, it may be difficult to obtain an independent value for an outstanding OTC derivatives transaction.
−Removed: USO is not leveraged.
−Removed: USO has not leveraged, and does not intend to leverage, its assets through borrowings or otherwise, and makes its investments accordingly.
−Removed: Consistent with the foregoing, USO’s announced investment intentions, and any changes thereto, will take into account the need for USO to make permitted investments that also allow it to maintain adequate liquidity to meet its margin and collateral requirements and to avoid, to the extent reasonably possible, USO becoming leveraged.
−Removed: If market conditions require it, USO may implement risk reduction procedures, which may include changes to USO’s investments, and such changes may occur on short notice if they occur other than during a roll or rebalance period.
+Added: USO’s rights under an OTC contract may be restricted by regulations.
+Added: Regulations adopted by global prudential regulators that are now in effect require certain prudentially regulated entities and certain of their affiliates and subsidiaries (including swap dealers) to include in their derivatives contracts and certain other financial contracts terms that delay or restrict the rights of counterparties (such as USO) to terminate such contracts, foreclose upon collateral, exercise other default rights or restrict transfers of credit support in the event that the prudentially regulated entity and/or its affiliates are subject to certain types of resolution or insolvency proceedings.
+Added: Similar regulations and laws have been adopted in non-U.S.
+Added: jurisdictions that may apply to USO’s counterparties located in those jurisdictions.
+Added: It is possible that these new requirements, as well as potential additional resulted government regulation, could adversely affect USO’s ability to terminate existing derivatives contracts, exercise default rights, or satisfy obligations owed to it with collateral received under such contracts.
+Added: The use of swap agreements may expose USO to early termination risk, which could result in significant losses to USO.
+Added: Swap agreements do not have uniform terms.
+Added: A swap counterparty may have the right to close out USO’s position due to the occurrence of certain events (for example, if a counterparty is unable to hedge its obligations to USO, or if USO defaults on certain terms of the swap agreement, or if there is a material decline in USO’s NAV on a particular day) and request immediate payment of amounts owed by USO under the agreement.
+Added: If the level of USO’s NAV has a dramatic intraday move, the terms of the swap agreement may permit the counterparty to close out a transaction with USO at a price calculated by the counterparty that, in good faith, represents such counterparty’s loss, which may not represent fair market value.
+Added: A swap counterparty may also have the right to close out USO’s position for no reason, in some cases with same day notice.
+Added: USO is not leveraged, but it could become leveraged if it had insufficient assets to completely meet its margin or collateral requirements relating to its investments.
+Added: Although permitted to do so under its LP Agreement, USO has not leveraged, and does not intend to leverage, its assets through borrowings or otherwise, and makes its investments accordingly.
+Added: Consistent with the foregoing, USO’s investments will take into account the need for USO to maintain adequate liquidity to meet its margin and collateral requirements and to avoid, to the extent reasonably possible, USO becoming leveraged.
+Added: If market conditions require it, USO may implement risk reduction procedures, which may include changes to USO’s investments, and such changes may occur on short notice.
+Added: USO does not and will not borrow money or use debt to satisfy its margin or collateral obligations in respect of its investments, but it could become leveraged if USO were to hold insufficient assets that would allow it to meet not only the current, but also future, margin or collateral obligations required for such investments.
+Added: Such a circumstance could occur if USO were to hold assets that have a value of less than zero.
+Added: USCF endeavors to have the value of USO’s Treasuries, cash and cash equivalents, whether held by USO or posted as margin or other collateral, at all times approximate the aggregate market value of its obligations under its Oil Futures Contracts and Other Oil-Related Investments.
USO may temporarily limit the offering of Creation Baskets.
5 unchanged sentences
It is difficult to execute a trade at a specific price when there is a relatively small volume of buy and sell orders in a market.
−Removed: A market disruption, such as a foreign government taking political actions that disrupt the market for its currency, its crude oil production or exports, or another major export, can also make it difficult to liquidate a position.
+Added: A market disruption, such as a war or a foreign government taking political actions that disrupt the market for its currency, its crude oil production or exports, or another major export, can also make it difficult to liquidate a position.
Because both Oil Futures Contracts and Other Oil-Related Investments may be illiquid, USO’s Oil Interests may be more difficult to liquidate at favorable prices in periods of illiquid markets and losses may be incurred during the period in which positions are being liquidated.
3 unchanged sentences
In addition, even if collateral is used to reduce counterparty credit risk, sudden changes in the value of OTC transactions may leave a party open to financial risk due to a counterparty default since the collateral held may not cover a party’s exposure on the transaction in such situations.
−Removed: USO is not actively managed and its investment objective is to track the Benchmark Oil Futures Contracts so that the average daily percentage change in USO’s NAV for any period of 30 successive valuation days will be within plus/minus ten percent (10%) of the average daily percentage change in the price of the Benchmark Oil Futures Contracts over the same period.
+Added: USO is not actively managed and its investment objective is to track the Benchmark Oil Futures Contract so that the average daily percentage change in USO’s NAV for any period of 30 successive valuation days will be within plus/minus ten percent (10%) of the average daily percentage change in the price of the Benchmark Oil Futures Contract over the same period.
USO is not actively managed by conventional methods.
−Removed: 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
−Removed: 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.
+Added: Accordingly, if USO’s investments in Oil Interests are declining in value, in the ordinary course, USO will not close out such positions except in connection with paying the proceeds to an Authorized Participant upon the redemption of a basket or closing out its positions in Oil Futures Contracts and other permitted investments (i) in connection with the monthly change in the Benchmark Oil Futures Contract;
+Added: (ii) when USO otherwise determines it would be appropriate to do so, e.g., due to regulatory requirements or risk mitigation measures (including those that may be taken by USO, USO’s FCMs, counterparties or other market participants);
+Added: or (iii) 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.
−Removed: Although USO has always had the ability to invest in Oil Futures Contracts beyond the Benchmark Oil Futures Contract and in Other Oil-Related Investments, USO announced its intention to invest in Oil Futures Contracts other than the Benchmark Oil Futures Contract and that it could, if it determined it appropriate in light of market conditions and regulatory requirements, invest in Other Oil-Related Interests.
−Removed: As of the date of this Form 10-K, it is likely that the factors limiting USO’s investments in the Benchmark Oil Futures Contract will continue, including as a result of the COVID-19 pandemic and the state of the crude oil markets, and USO may determine to invest in other Oil Futures Contracts and, Other Oil-Related Investments.
−Removed: USO’s ability to invest in the Benchmark Oil Futures Contract could be limited as a result of any or all of the following:
−Removed: evolving market conditions, a change in regulatory accountability levels and position limits imposed on USO with respect to its investment in Oil Futures Contracts, additional or different risk mitigation measures taken by market participants, generally, including USO, with respect to USO acquiring additional Oil Futures Contracts, or USO selling additional shares.
−Removed: Accordingly, for the foreseeable future, to address and comply with the market conditions, regulatory requirements and other factors that have influenced, and will continue to influence, its investment decisions, USO intends to buy or sell its permitted investments when USO increases or decreases either its portfolio overall or its holdings of particular investments.
−Removed: USO has disclosed the parameters for making decisions regarding the permitted investments USO will hold, including the intended order of priority in selecting investments and the type of investments to be held in its portfolio.
−Removed: The type and percentages of investments to be held by USO at the end of the monthly roll period as well as going forward, including for any rebalances, is published on its website at www.uscfinvestments.com.
−Removed: USO’s positions in Oil Futures Contracts and Other Oil Related Investments roll over a ten-day period.
−Removed: In addition, while determining the appropriate investments for USO’s portfolio in accordance with its current intention, or to address the foregoing changes in market conditions, regulatory requirements or risk mitigation measures, USO may need to hold significant portions of its portfolio in cash beyond what it has historically held in order to satisfy potential margin requirements.
−Removed: USO may not meet the listing standards of NYSE Arca, which would adversely impact an investor’s ability to sell shares.
+Added: USO has always had the ability to invest in Oil Futures Contracts beyond the Benchmark Oil Futures Contract and in Other Oil-Related Investments, and following the events that occurred in the Spring of 2020, USO has invested accordingly in Oil Futures Contracts other than the Benchmark Oil Future Contract and in OTC swaps.
+Added: Beginning with the monthly roll in September 2023 and ending with the monthly roll in January 2024, USO’s intention is to begin transitioning its investment portfolio so that it will primarily invest in Benchmark Oil Futures Contracts, consistent with USO’s investment strategy prior to the Spring of 2020.
+Added: However, USO has had, and will continue to have, the ability to invest in Oil Futures Contracts beyond the Benchmark Oil Futures Contract and Other Oil-Related Investments, such as OTC swaps, and USO may make such investments if market conditions, regulatory requirements, risk mitigation measures (including those that may be taken by USO, USO’s FCMs, counterparties or other market participants), liquidity requirements,
+Added: or other factors require USO to do so in order to meet its investment objective.
+Added: USO may invest in Oil Futures Contracts beyond the Benchmark Oil Futures Contract, and/or Other Oil-Related Investments, as a result or in response to any of the foregoing factors.
+Added: In addition, USO may need to hold significant portions of its portfolio in cash beyond what it has historically held for reasons including (but not limited to) the need to address the changes in market conditions, regulatory requirements or risk mitigation measures, or the need to satisfy potential margin requirements.
+Added: USO’s ability to invest in the Benchmark Oil Futures Contract or other permitted investments could be limited as a result of any or all of the following:
+Added: evolving market conditions, a change in regulatory accountability levels and position limits imposed on USO with respect to its investment in Oil Futures Contracts, additional or different risk mitigation measures (including those that may be taken by USO, USO’s FCMs, counterparties or other market participants) with respect to USO acquiring additional Oil Futures Contracts, or USO selling additional shares.
+Added: Accordingly, to address and comply with the market conditions, regulatory requirements and other factors that have influenced, and will continue to influence, its investment decisions, USO intends to buy or sell its permitted investments when USO increases or decreases either its portfolio overall or its holdings of particular investments.
+Added: USO may not meet the listing standards of NYSE Arca, which could adversely impact an investor’s ability to sell shares.
USO’s shares are listed for trading on the NYSE Arca under the market symbol “USO.” NYSE Arca may suspend USO’s shares from trading on the exchange with or without prior notice to USO, upon failure of USO to comply with the NYSE’s listing requirements, or when in its sole discretion, the NYSE Arca determines that such suspension of dealings is in the public interest or otherwise warranted.
13 unchanged sentences
If an investor needs to sell shares at a time when no active trading market for them exists, the price the investor receives upon sale of the shares, assuming they were able to be sold, likely would be lower than if an active market existed.
−Removed: USO could become leveraged if it had insufficient assets to completely meet its margin or collateral requirements relating to its investments .
−Removed: Although USO does not and will not borrow money or use debt to satisfy its margin or collateral obligations in respect of its investments, it could become leveraged if USO were to hold insufficient assets that would allow it to meet not only the current, but also future, margin or collateral obligations required for such investments.
−Removed: Such a circumstance could occur if USO were to hold assets that have a value of less than zero.
−Removed: USCF endeavors to have the value of USO’s Treasuries, cash and cash equivalents, whether held by USO or posted as margin or other collateral, at all times approximate the aggregate market value of its obligations under its Oil Futures Contracts and Other Oil-Related Investments.
−Removed: Although permitted to do so under its Limited Partnership Agreement, USO has not and does not intend to leverage its assets by making investments beyond its potential ability to meet the potential margin and collateral obligations relating to such investments.
−Removed: Consistent with this, USO’s announced investment intentions, and any changes thereto, will take into account the need for USO to make permitted investments that also allow it to maintain adequate liquidity to meet its margin and collateral requirements and to avoid, to the extent reasonably possible, USO becoming leveraged, including by its holding of assets that have a high probability of having a value of less than zero.
−Removed: If market conditions require it, these risk reduction procedures may occur on short notice.
Limited partners and shareholders do not participate in the management of USO and do not control USCF, so they do not have any influence over basic matters that affect USO.
2 unchanged sentences
Limited partners and shareholders have no right to elect USCF on an annual or any other continuing basis.
−Removed: If USCF voluntarily withdraws, however, the holders of a majority of USO’s outstanding shares (excluding for purposes of such determination shares owned, if any, by the withdrawing general partner and its affiliates) may elect its successor.
+Added: If USCF voluntarily withdraws, however, the holders of a majority of USO’s outstanding shares (excluding for purposes of such determination shares owned, if any, by
+Added: the withdrawing general partner and its affiliates) may elect its successor.
USCF may not be removed as general partner except upon approval by the affirmative vote of the holders of at least 66 2/3 percent of USO’s outstanding shares (excluding shares, if any, owned by USCF and its affiliates), subject to the satisfaction of certain conditions set forth in the LP Agreement.
5 unchanged sentences
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.
−Removed: 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.
+Added: 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 The Marygold Companies, Inc., 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.
1 unchanged sentence
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.
−Removed: In addition, any Director may be removed
−Removed: by written consent of USCF Investments, Inc.
+Added: 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.
−Removed: 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”.
−Removed: 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.
+Added: The sole shareholder of USCF Investments is The Marygold Companies, Inc., formerly Concierge Technologies, Inc.
+Added: (“Marygold”), a company publicly traded under the ticker symbol “MGLD.” Mr.
+Added: Gerber, along with certain of his 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 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.
−Removed: Having control in one person could have a negative impact on USCF and USO, including its regulatory obligations.
+Added: Having control in one person could have a negative impact on USCF and USO, including their 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.
6 unchanged sentences
Because USO’s shares are publicly traded, USO is subject to certain rules and regulations of federal, state and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded.
−Removed: These entities include the Public Company Accounting Oversight Board (the “PCAOB”), the SEC, the CFTC and NYSE Arca and these authorities have continued to develop additional regulations or interpretations of existing regulations.
+Added: These entities include the Public Company Accounting Oversight Board (the “PCAOB”), the SEC, the CFTC, the NFA, and NYSE Arca and these authorities have continued to develop additional regulations or interpretations of existing regulations.
USO’s ongoing efforts to comply with these regulations and interpretations have resulted in, and are likely to continue resulting in, a diversion of management’s time and attention from revenue-generating activities to compliance related activities.
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In addition, the SEC, CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements, the establishment of daily price limits and the suspension of trading.
−Removed: Further, various national governments outside of the United States have expressed concern regarding the disruptive effects of speculative trading in the energy markets and the need to regulate the derivatives markets in general.
+Added: Further, various national governments outside of the United States have expressed concern regarding the disruptive effects of speculative trading in the commodities markets and the need to regulate the derivatives markets in general.
The effect of any future regulatory change on USO is impossible to predict, but it could be substantial and adverse.
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Although USCF attempts to monitor these conflicts, it is extremely difficult, if not impossible, for USCF to ensure that these conflicts do not, in fact, result in adverse consequences to the shareholders.
−Removed: USCF serves as the general partner or sponsor to the Related Public Funds, including USO.
+Added: USCF serves as the general partner or sponsor to each of USO and the Related Public Funds.
USCF may have a conflict to the extent that its trading decisions for USO may be influenced by the effect they would have on the other funds it manages.
By way of example, if, as a result of reaching position limits imposed by the NYMEX, USO purchased oil futures contracts, this decision could impact USO’s ability to purchase additional oil futures contracts if the number of contracts held by funds managed by USCF reached the maximum allowed by the NYMEX.
−Removed: Similar situations could adversely affect the ability of any fund to track its benchmark futures contract.
−Removed: USO may also be subject to certain conflicts with respect to its FCMs, including, but not limited to, conflicts that result from receiving greater amounts of compensation from other clients, or purchasing opposite or competing positions on behalf of third party accounts traded through the FCMs.
+Added: Similar situations could adversely affect the ability of the Related Public Funds to track their benchmark futures contract(s).
+Added: USO may also be subject to certain conflicts with respect to its FCMs, including, but not limited to, conflicts that result from the FCM receiving greater amounts of compensation from other clients, or purchasing opposite or competing positions on behalf of third-party accounts traded through the FCMs.
In addition, USCF’s principals, officers, directors or employees may trade futures and related contracts for their own account.
3 unchanged sentences
USO may terminate at any time, regardless of whether USO has incurred losses, subject to the terms of the LP Agreement.
−Removed: In particular, unforeseen circumstances, including, but not limited to, (i) market conditions, regulatory requirements, risk mitigation measures taken by USO or third parties or otherwise that would lead USO to determine that it could no longer foreseeably meet its investment objective or that USO’s aggregate net assets in relation to its operating expenses or its margin or collateral requirements make the continued operation of USO unreasonable or imprudent, or (ii) adjudication of incompetence, bankruptcy, dissolution, withdrawal, or removal of USCF as the general partner of USO could cause USO to terminate unless a majority interest of the limited partners within 90 days of the event elects to continue the partnership and appoints a successor general partner, or the affirmative vote of a majority in interest of the limited partners subject to certain conditions.
+Added: In particular, unforeseen circumstances, including, but not limited to, (i) market conditions, regulatory requirements, risk mitigation measures (including those that may be taken by USO, USO’s FCMs, counterparties or other market participants) that would lead USO to determine that it could no longer foreseeably meet its investment objective or that USO’s aggregate net assets in relation to its operating expenses or its margin or collateral requirements make the continued operation of USO unreasonable or imprudent, or (ii) adjudication of incompetence, bankruptcy, dissolution, withdrawal, or removal of USCF as the general partner of USO could cause USO, to terminate unless a majority interest of the limited partners within 90 days of the event elects to continue the partnership and appoints a successor general partner, or the affirmative vote of a majority in interest of the limited partners subject to certain conditions.
However, no level of losses will require USCF to terminate USO.
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If this income becomes significant then cash distributions may be made.
−Removed: An unanticipated number of redemption requests during a short period of time could have an adverse effect on USO’s NAV.
+Added: An unanticipated number of Redemption Basket requests during a short period of time could have an adverse effect on USO’s NAV.
If a substantial number of requests for redemption of Redemption Baskets are received by USO during a relatively short period of time, USO may not be able to satisfy the requests from USO’s assets not committed to trading.
As a consequence, it could be necessary to liquidate positions in USO’s trading positions before the time that the trading strategies would otherwise dictate liquidation.
−Removed: An unanticipated number of Creation Basket requests during a short period of time could result in a shortage of shares.
−Removed: USCF makes every effort to predict and maintain an adequate amount of shares outstanding.
−Removed: However, if a substantial number of requests for Creation Baskets are received by USO during a relatively short period of time that substantially differ from past creation volumes, due to market volatility or otherwise (including, for example, the volatility that occurred during the COVID-19 pandemic, related supply chain disruptions and ongoing disputes among oil-producing countries regarding limits on the production of crude oil), there could be a shortage of USO shares.
−Removed: Among other things, such conditions could result in circumstances where USO may not have sufficient shares available for sale to satisfy demand and Authorized Participants may, therefore, be unable to purchase additional Creation Baskets.
−Removed: 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.
3 unchanged sentences
In addition, Authorized Participants may be less willing to offer to quote offers to buy or sell shares in large numbers.
−Removed: The potential impact of either wider spreads between bid and offer prices, or reduced number of shares on which quotes may be available, could increase the trading costs to investors in USO compared to the quotes and the number of shares on which bids and offers are made if the Authorized Participants still were able to freely create new baskets of shares.
+Added: The potential impact of either wider spreads between bid and offer prices, or reduced number of shares on which quotes may be available, could increase the trading
+Added: costs to investors in USO compared to the quotes and the number of shares on which bids and offers are made if the Authorized Participants still were able to freely create new baskets of shares.
In addition, there could be a significant variation between the market price at which shares are traded and the shares’ NAV, which is also the price shares can be redeemed with USO by Authorized Participants in Redemption Baskets.
−Removed: For example, USO suspended purchases of Creation Baskets in April 2020 as a result of the exhaustion of available SEC registered shares that could be issued by USO due to unexpected demand during the aforementioned market volatility arising from the COVID-19 pandemic, related supply chain disruptions and ongoing disputes among oil-producing countries.
+Added: The foregoing could also create significant deviations from USO’s investment objective.
+Added: Any potential impact to the market for shares of USO that could occur from the Authorized Participant’s inability to create new baskets would likely not extend beyond the time when USO resumes selling Creation Baskets.
+Added: For example, USO suspended purchases of Creation Baskets in April 2020 as a result of the exhaustion of available SEC registered shares that could be issued by USO due to unexpected demand during the aforementioned market volatility arising from the COVID-19 pandemic, related supply chain disruptions, war and disputes among oil-producing countries.
At the time of this suspension, the market price of USO shares on April 21, 2020 was 36% higher than USO’s reported end-of-day per share NAV.
A significant portion of this difference can be attributed to the fact that USO’s NAV is calculated based on the settlement price of Oil Futures Contracts at 2:30 p.m.
−Removed: New York Time, which is ninety (90) minutes earlier than the determination of the closing share price at 4:00 p.m.
−Removed: New York Time.
+Added: Eastern time, which is ninety (90) minutes earlier than the determination of the closing share price at 4:00 p.m.
+Added: Eastern time.
The closing share price takes into account changes in the price of Oil Futures Contracts that occur after the settlement price is determined.
1 unchanged sentence
In addition, investors should be aware that such premiums can be transitory.
−Removed: The high premium that occurred recently was short-lived and fell almost immediately, notwithstanding the suspension of sales of Creation Basket.
+Added: The high premium that occurred in the Spring of 2020 was short-lived and fell almost immediately, notwithstanding the suspension of sales of Creation Baskets.
On April 22, 2020, the market price of USO shares fell to a level of 8.66% above the per share NAV, and, from April 23, 2020, continued its decline to 1.45% on May 1, 2020.
−Removed: For the period beginning May 1, 2020 and ending May 29, 2020 the premium averaged 2.25%.
−Removed: Any potential premium or impact to the market in shares of USO that could occur from the Authorized Participants’ inability to purchase new Creation Baskets would likely not extend beyond the time when additional shares of USO would be registered and available for distribution.
−Removed: USO may limit the offering of its Creation Baskets if it determines that it cannot reasonably reinvest the proceeds in a manner that meets its investment objective and satisfy regulatory requirements and risk mitigation measures.
−Removed: USO may determine that USO will limit the issuance of its shares through the offering of Creation Baskets to its Authorized Participants.
−Removed: As a result of certain circumstances described herein, including (1) the need to comply with regulatory requirements (including, but not limited to, exchange accountability levels and position limits);
+Added: For the period beginning May 1, 2020 and ending May 29, 2020 the premium averaged 2.25%, and for the period from beginning June 30, 2020 through December 31, 2020, the premium averaged -0.14%.
+Added: Any potential premium or impact to the market in shares of USO that could occur from the Authorized Participants’ inability to purchase new Creation Baskets would likely not extend beyond the time when USO resumes selling Creation Baskets.
+Added: USO may determine that, to allow it to reinvest the proceeds from sales of its Creation Baskets in currently permitted assets in a manner that meets its investment objective, it may limit its offers of Creation Baskets.
+Added: USO may determine to limit the issuance of its shares through the offering of Creation Baskets to its Authorized Participants.
+Added: As a result of certain circumstances described herein, including (1) the need to comply with regulatory requirements (including, but not limited to, exchange accountability levels and position limits as well as statutory or regulatory limits);
(2) market conditions (including but not limited to those allowing USO to obtain greater liquidity or to execute transactions with more favorable pricing);
−Removed: 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.
+Added: and (3) risk mitigation measures (including those that may be taken by USO, USO’s FCMs, counterparties or other market participants) 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.
+Added: If such a determination is made, the same consequences associated with a suspension of the offering of Creation Baskets, as described in the foregoing risk factor, “The suspension in the ability of Authorized Participants to purchase Creation Baskets could cause USO’s NAV to differ materially from its trading price,” could also occur as a result of USO determining to limit the offering of creation baskets.
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.
3 unchanged sentences
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.
−Removed: Federal Reserve and other foreign equivalents to curb inflation, and resulting market reaction to those initiatives.
+Added: Federal Reserve and other foreign equivalents to curb inflation, and resulting market reactions 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.
−Removed: USO may lose money by investing in government money market funds.
+Added: USO may potentially 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.
−Removed: 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.
+Added: An investment in a government money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (the “FDIC”), or any other government agency.
The share price of a government money market fund can fall below the $1.00 share price.
3 unchanged sentences
A government money market fund’s share price can also be negatively affected during periods of high redemption pressures and/or illiquid markets.
−Removed: The failure or bankruptcy of a clearing broker or USO’s Custodian could result in a substantial loss of USO’s assets and could impair USO in its ability to execute trades.
+Added: The failure or bankruptcy of a clearing broker could result in a substantial loss of USO’s assets and could impair USO in its ability to execute trades.
The CEA and CFTC regulations impose several requirements on FCMs and clearing houses that are designed to protect customers, including mandating the implementation of risk management programs, internal monitoring and controls, capital and liquidity standards, customer disclosures, and auditing and examination programs.
4 unchanged sentences
This is because if such a bankruptcy were to occur, USO would be afforded the protections granted to customers of an FCM, and participants to transactions cleared through a clearing house, under the United States Bankruptcy Code and applicable CFTC regulations.
−Removed: Such provisions generally provide for a pro rata distribution to customers of customer property held by the bankrupt FCMs or an exchange’s clearing house if the customer property held by the FCMs or the exchange’s clearing house is insufficient to satisfy all customer claims.
−Removed: Bankruptcy of a clearing FCMs can be caused by, among other things, the default of one of the FCM’s customers.
+Added: Such provisions generally provide for a pro rata distribution to customers of customer property held by the bankrupt FCM or an Exchange’s clearing house if the customer property held by the FCM or the Exchange’s clearing house is insufficient to satisfy all customer claims.
+Added: Bankruptcy of a clearing FCM can be caused by, among other things, the default of one of the FCM’s customers.
In this event, the Exchange’s clearing house is permitted to use the entire amount of margin posted by USO (as well as margin posted by other customers of the FCM) to cover the amounts owed by the bankrupt FCM.
4 unchanged sentences
The insolvency of the Custodian could result in a complete loss of USO’s assets held by that Custodian, which, at any given time, would likely comprise a substantial portion of USO’s total assets.
−Removed: Third parties may infringe upon or otherwise violate intellectual property rights or assert that USCF has infringed or otherwise violated their intellectual property rights, which may result in significant costs and diverted attention.
−Removed: It is possible that third parties might utilize USO’s intellectual property or technology, including the use of its business methods, trademarks and trading program software, without permission.
−Removed: USCF has a patent for USO’s business method and has registered its trademarks.
−Removed: USO does not currently have any proprietary software.
−Removed: However, if it obtains proprietary software in the future, any unauthorized use of USO’s proprietary software and other technology could also adversely affect its competitive advantage.
−Removed: USO may not have adequate resources to implement procedures for monitoring unauthorized uses of its patents, trademarks, proprietary software and other technology.
−Removed: Also, third parties may independently develop business methods, trademarks or proprietary software and other technology similar to that of USCF or claim that USCF has violated their intellectual property rights, including their copyrights, trademark rights, trade names, trade secrets and patent rights.
−Removed: As a result, USCF may have to litigate in the future to protect its trade secrets, determine the validity and scope of other parties’ proprietary rights, defend itself against claims that it has infringed or otherwise violated other parties’ rights, or defend itself against claims that its rights are invalid.
−Removed: Any litigation of this type, even if USCF is successful and regardless of the merits, may result in significant costs, divert its resources from USO, or require it to change its proprietary software and other technology or enter into royalty or licensing agreements.
Due to the increased use of technologies, intentional and unintentional cyber-attacks pose operational and information security risks.
2 unchanged sentences
Cyber-attacks include, but are not limited to, gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption.
−Removed: Cyber-attacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on websites.
+Added: Cyberattacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on websites.
Cyber security failures or breaches of USO’s clearing broker or third party service provider (including, but not limited to, index providers, the administrator and transfer agent, the custodian), have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, the inability of USO shareholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs.
9 unchanged sentences
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.
−Removed: Political and other actors and their agents increasingly seek to advance climate change objectives
−Removed: 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.
+Added: 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.
2 unchanged sentences
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.
−Removed: USO, USCF and USCF’s directors and certain of its officers are currently subject to class action litigation.
+Added: USO, USCF and USCF’s directors and certain of its officers are currently subject to litigation.
Estimating an amount or range of possible losses resulting from litigation proceedings to USO and USCF is inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for monetary damages and are subject to appeal.
2 unchanged sentences
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.
−Removed: 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 other Related Public Funds.
+Added: In addition, litigation could result in substantial costs and divert USCF’s management’s attention and resources from conducting USCF’s operations, including the management of USO and the Related Public Funds.
For more information, see “Item 3.
Legal Proceedings” in this annual report on Form 10-K.
−Removed: Unresolved Staff Comments.
−Removed: Not applicable.
−Removed: Not applicable.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.