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Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-02-27 · 139 added, 193 removed, 394 unchanged (46% of the section changed)

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

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

and foreign currencies, market volatility in the crude oil markets and futures markets in part attributable to the COVID-19 pandemic in February 2020, the Russia-Ukraine war and conflicts in the Middle East.

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

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USO, a Delaware limited partnership, is a commodity pool that issues shares that may be purchased and sold on the NYSE Arca.

The investment objective of USO is for the daily changes in percentage terms of its shares’ per share NAV to reflect the daily changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the daily changes in the price of the futures contract for light, sweet crude oil traded on the NYMEX that is the near month contract to expire, except when the near month contract is within two weeks of expiration, in which case it will be measured by the futures contract that is the next month contract to expire (the “Benchmark Oil Futures Contract”), plus interest earned on USO’s collateral holdings, less USO’s expenses.

The investment objective of USO is for the daily changes in percentage terms of its shares’ per share NAV to reflect the daily changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the daily changes in the price of the futures contract for light, sweet crude oil traded on the NYMEX that is the near month contract to expire and changes, over a ten-day period, into the NYMEX futures contract that is the next month to expire (the “Benchmark Oil Futures Contract”), plus interest earned on USO’s collateral holdings, less USO’s expenses.The change from the near month contract to the next month contract occurs at the beginning of each month and will be approximately proportional, relative to total net assets, over each day of the ten-day roll period.

“Near month contract” means the next contract traded on the NYMEX due to expire.

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USO seeks to achieve its investment objective by investing so that the average daily percentage change in USO’s NAV for any period of 30 successive valuation days will be within plus/minus ten percent (10%) of the average daily percentage change in the price of the Benchmark Oil Futures Contract over the same period.

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

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

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

The general partner of USO, United States Commodity Funds, LLC (“USCF”), believes that it is not practical to manage the portfolio to achieve such an investment goal when investing in Oil Futures Contracts and Other Oil-Related Investments.

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.

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

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

USCF believes that market arbitrage opportunities will cause daily changes in USO’s share price on the NYSE Arca on a percentage basis to closely track daily changes in USO’s per share NAV on a percentage basis but there can be no assurance of that.

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

USO is currently invested in Oil Futures Contracts in months other than the Benchmark Oil Futures Contract.

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.

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.

Beginning with the monthly roll in September 2023 and ending with the monthly roll in January 2024, USO began transitioning its investment portfolio so that it primarily invests in Benchmark Oil Futures Contracts, consistent with USO’s investment strategy prior to the Spring of 2020.

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.

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.

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

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

USCF believes that the net effect of these relationships will be that the daily changes in the price of USO’s shares on the NYSE Arca on a percentage basis will closely track the daily changes in the spot price of a barrel of light, sweet crude oil on a percentage basis, plus interest earned on USO’s collateral holdings, less USO’s expenses.

As noted above, USO seeks to achieve its investment objective by investing so that the average daily percentage change in USO’s NAV for any period of 30 successive valuation days will be within plus/minus ten percent (10%) of the average daily percentage change in the price of the Benchmark Oil Futures Contract over the same period.

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

Such circumstances include:

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

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

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

As a result of market and regulatory conditions, including significant market volatility, large numbers of USO shares purchased during a short period of time, and applicable regulatory accountability levels and position limits on oil futures contracts that were imposed on USO in 2020, including as a result of the COVID-19 pandemic and the state of crude oil markets, USO has invested in Oil Futures Contracts (as defined above) in months other than the Benchmark Oil Futures Contract and in Other Oil-Related Investments, such as OTC swaps.

The foregoing has impacted the performance of USO and its ability meet its investment objective within as narrow a percentage difference between the average daily percentage change in USO’s NAV for any period of 30 successive valuation days and the average daily percentage change in the price of the Benchmark Oil Futures Contract as it typically had prior to the Spring of 2020.

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

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

The following chart shows, for the period ending December 31, 2023, the rolling 30-day average difference between USO’s NAV and the Benchmark Oil Futures Contract.

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The calculation is repeated daily.

Prior to the Spring of 2020, USO achieved its investment objective by primarily investing in the Benchmark Oil Futures Contract and Oil Futures Contracts for light, sweet crude oil traded on NYMEX and ICE Futures with the same maturity month as the Benchmark Oil Futures Contract.

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

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

Certain circumstances resulting from such volatility caused USO to invest in Oil Futures Contracts other than the Benchmark Oil Futures Contract.

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

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

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

Specifically:

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

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

In addition, the ICE WTI Contract is subject

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

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

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

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

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

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

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.

RBC also advised USO at that time, that, going forward, it may only purchase additional Benchmark Oil Futures Contracts and other Oil Futures Contracts through RBC for rolls and rebalances of USO’s portfolio and not as investments for the proceeds of new Creation Baskets.

The limits on positions imposed by RBC on holdings in USO’s portfolio applied regardless of whether the Oil Futures Contracts purchased would be within the accountability levels and position limits permitted by NYMEX and ICE.

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

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

These FCMs have not precluded USO from purchasing, holding, or reinvesting the proceeds from the purchases of Creation Baskets in Oil Futures Contracts, including the Benchmark Oil Futures Contract consistent with USO’s announced investment strategy.

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

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

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

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

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

During that time, USO had to invest in other permitted Oil Futures Contracts and had to more frequently rebalance and adjust the types of holdings in its portfolio than it has in the past.

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

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

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

Current Investment Parameters.

As noted above, USO has had the ability to invest in Oil Futures Contracts beyond the Benchmark Oil Futures Contract and in Other Oil-Related Investments but, until the market and other events occurring in 2020 described herein, USO’s need to exercise this ability to make such investments had been limited.

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

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

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

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

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

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

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

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

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

The first through the twelfth month WTI Oil Futures Contracts;

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

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

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

USO may also utilize the Oil Futures Contracts based on WTI, WTI Oil Futures Contacts or other types of crude oil traded on the Dubai, Singapore, and Houston exchanges, if and when these contracts reach sufficient scale and liquidity to meaningfully contribute to USO’s investment objective, in addition to the foregoing investments;

then, finally,

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

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

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

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

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

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

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

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

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

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

In such circumstances, the changes will be published on the website at the end of the day.

USO will attempt to execute rebalances required over several days to minimize market impact.

However, it may be necessary to execute these risk measures rapidly and with minimal notice.

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

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

evolving market conditions (including liquidity requirements), a change in regulator accountability levels and position limits imposed on USO with respect to its investment in Oil Futures Contracts, additional or different risk mitigation measures taken, or that could be taken, by market participants, generally, including USO, with respect to USO acquiring additional Oil Futures contracts, or USO selling additional shares USO’s ability to invest in the Benchmark Oil Futures Contract could be limited by any of these occurrences.

In addition, while determining the

appropriate investments for USO’s portfolio in accordance with its current intention, or to address the foregoing changes in market conditions (including liquidity requirements), regulatory requirements or risk mitigation measures, USO may need to hold significant portions of its portfolio in cash beyond what it has historically held in order to satisfy potential margin requirements.

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

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

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

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

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

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

As a result of market conditions and the regulatory response that occurred in the Spring of 2020 and thereafter, large numbers of USO shares that were purchased during a short period of time, and regulatory accountability levels and position limits on oil futures contracts that were imposed on USO, and risk mitigation measures imposed by its FCMs, USO invested, and continues to invest, in Oil Futures Contracts in months other than the Benchmark Oil Futures Contracts as well as Other Oil Interests.

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

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

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

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

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

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

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

Consistent with the foregoing, USO’s announced investment intentions, and any changes thereto, will take into account the need for USO to make permitted investments that also allow it to maintain adequate liquidity to meet its margin and collateral requirements and to avoid, to the extent reasonably possible, USO becoming leveraged.

If market conditions require it, these risk reduction procedures may occur on short notice if they occur other than during a roll or rebalance period.

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

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

Accordingly, USO invested, and since then has continued to invest, in other permitted Oil Futures Contracts with expirations in later months than the Benchmark Oil Futures Contract.

USO also invested, and has continued to invest, in other permitted investments, including Other Oil-Related Investments, including OTC swaps.

In addition, during the Spring of 2020, USO had to rebalance and adjust the types of holdings in its portfolio more frequently than it had in the past.

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.

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.

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.

If market conditions require it, these risk reduction procedures, including changes to USO’s investments, may occur on short notice.

Regulatory Disclosure

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

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

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

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

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

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

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

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In addition, the NYMEX imposes an accountability level for all months of 20,000 net futures contracts for light, sweet crude oil.

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

If USO and the other Related Public Funds exceed these accountability levels for investments in the futures contracts for light, sweet crude oil, the NYMEX and ICE Futures will monitor such exposure and may ask for further information on their activities including the total size of all positions, investment and trading strategy, and the extent of liquidity resources of USO and the other Related Public Funds.

In addition, the ICE Futures 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 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.

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

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

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.

For the year ended December 31, 2023, USO did not exceed any position limits imposed by the NYMEX and ICE Futures.

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Due to evolving market conditions, remaining within relevant accountability levels and position limits, and, any additional or different risk mitigation measures taken by USO’s FCMs in the future with respect to USO acquiring additional Oil Futures contracts, USO has invested and intends to invest in other permitted investments, beyond the Benchmark Oil Futures Contract.

Commencing with the monthly roll that occurred in May 2020, USO’s positions in Oil Futures Contracts and Other Oil Related Investments roll over a ten-day period, whereas previously USO’s positions would roll over a four-day period.

As of May 1, 2020, the type and percentages of investments to be held by USO at the end of the monthly roll period as well as for any rebalances are published on its website www.uscfinvestments.com.

Federal Position Limits

In October 2020, the CFTC adopted a rule to establish federal position limits for 25 core referenced futures contracts (comprised of agricultural, energy and metals futures contracts), futures and options linked to the core referenced futures contracts, and swaps that are economically equivalent to the core referenced futures contracts (the “Position Limits Rule”).

The limits for futures contracts are currently in effect;

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

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

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

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

Accordingly, the Position Limits Rule could 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.

Margin for OTC Swaps

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

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

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

Mandatory Trading and Clearing of Swaps

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exchanges to be offered and sold in the United States.

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.

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.

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.

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 Contracts, and Other Oil-Related Investments.

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.

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.

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.

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.

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

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

USO 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.

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.

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.

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

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

held by a government money market fund may vary.

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

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

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The price of the Benchmark Oil Futures Contract started the year at $80.26 per barrel.

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

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

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

USO’s per share NAV began the year at $54.18 and ended the year at $70.05 on December 31, 2022, an increase of approximately 29.29% over the year.

The high of the year was on September 27, 2023 when the price reached $93.68 per barrel.

The low for the year was on March 17, 2023, which was $66.93 per barrel.

The year ended with the Benchmark Oil Futures Contract at $71.65 per barrel, a decrease of approximately (10.73)% over the year.

USO’s per share NAV began the year at $70.05 and ended the year at $66.91 on December 31, 2023, a decrease of approximately (4.48)% over the year.

The Benchmark Oil Futures Contract prices listed above began with the February 2023 contracts and ended with the February 2024 contracts.

The increase of approximately 6.71% on the Benchmark Oil Futures Contract listed above is a hypothetical return only and could not actually be achieved by an investor holding Oil Futures Contracts.

The decrease of approximately (10.73)% on

the Benchmark Oil Futures Contract listed above is a hypothetical return only and would not actually be realized by an investor holding Oil Futures Contracts.

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

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

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

During the year ended December 31, 2023, the crude oil futures market experienced states of both mild contango and strong backwardation.

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

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As of December 31, 2023, USO had issued 4,809,200,000 shares, 23,423,603 of which were outstanding.

As of December 31, 2022, there were 908,300,000 shares registered but not yet issued.

USO has registered 5,627,000,000 shares since inception.

On August 29, 2023, the SEC declared effective a registration statement filed by USO that registered an unlimited number of shares.

As a result, USO has an unlimited number of shares that can be issued in the form of Creation Baskets.

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

On April 28, 2020, after the close of trading on the NYSE Arca, USO effected a 1-for-8 reverse share split and post-split shares of USO began trading on April 29, 2020.

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

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

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

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

As of December 31, 2023, USO had the following Authorized Participants:

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

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

For the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

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Total fees and other expenses excluding management fees

Fees and expenses related the registration or offering of additional shares

Total commissions accrued to brokers

Total commissions as annualized percentage of average total net assets

Commissions accrued as a result of rebalancing

Percentage of commissions accrued as a result of rebalancing

Commissions accrued as a result of creation and redemption activity

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

Portfolio Expenses.

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The fee is accrued daily and paid monthly.

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

The decrease in the per share NAV for the year ended December 31, 2023, compared to the year ended December 31, 2022, was due primarily to lower prices for WTI crude oil and the related decrease in the value of the Oil Futures Contracts and other Oil Interests in which USO held and traded.

Average interest rates earned on short-term investments held by USO, including cash, cash equivalents and Treasuries, were higher during the year ended December 31, 2023, compared to the year ended December 31, 2022.

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

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

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

The increase in total fees and other expenses excluding management fees for the year ended December 31, 2023, compared to the year ended December 31, 2022 was due primarily to an increase in tax reporting and professional fees.

The increase in total commissions accrued to brokers for the year ended December 31, 2023, compared to the year ended December 31, 2022, was due primarily to a higher number of Oil Futures Contracts being held and traded.

Tracking USO’s Benchmark

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For the 30-valuation days ended December 31, 2023, the average daily change in the Benchmark Oil Futures Contract was (0.217)%, while the average daily change in the per share NAV of USO over the same time period was (0.195)%.

The average daily difference

was 0.089% (or 8.9 basis points, where 1 basis point equals 1/100 of 1%), meaning that over this time period USO’s NAV performed within the plus or minus 10% range established as its benchmark tracking goal.

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

The average daily difference was 0.022% (or 2.2 basis points, where 1 basis point equals 1/100 of 1%), meaning that over this time period USO’s NAV performed within the plus or minus 10% range established as its benchmark tracking goal.

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

The first graph exhibits the daily changes in the last 30 valuation days ended December 31, 2022.

The second graph measures monthly changes since December 31, 2017 through December 31, 2022.

Since the commencement of the offering of USO’s shares to the public on April 10, 2006 to December 31, 2023, the average daily change in the Benchmark Oil Futures Contract was 0.000%, while the average daily change in the per share NAV of USO over the same time period was (0.014)%.

The average daily difference was (0.014)% (or (1.4) basis points, where 1 basis point equals 1/100 of 1%),

meaning that over this time period USO’s NAV performed within the plus or minus 10% range established as its benchmark tracking goal.

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

The first chart below shows the daily movement of USO’s per share NAV versus the daily movement of the Benchmark Oil Futures Contract for the 30 valuation day period ended December 31, 2023.

The second chart below shows the monthly total returns of USO as compared to the monthly value of the Benchmark Oil Futures Contract for the five years ended December 31, 2023.

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

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

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

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

By comparison, for the year ended December 31, 2022, the actual total return of USO as measured by changes in its per share NAV was 29.29%.

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

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

As a result of market conditions and the regulatory response that occurred in March 2020 and thereafter, large numbers of USO shares that were purchased during a short period of time, and regulatory accountability levels and position limits on oil futures contracts that were imposed on USO, and risk mitigation measures imposed by its FCMs, USO invested in Oil Futures Contracts in months other than the Benchmark Oil Futures Contracts.

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

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

The impact of these expenses, offset by interest and dividend income, and

net of positive or negative execution, and net the difference in returns between USO’s current holdings and the Benchmark Futures contract tended to cause daily changes in the per share NAV of USO to track slightly higher than daily changes in the price of the Benchmark Oil Futures Contract.

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.

During the fourth quarter of 2023 the rolling 30 day average daily difference between the return of USO’s NAV and the Benchmark Futures Contract was (0.022)% (or (2.2) basis points).

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

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

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

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

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

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

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

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During the year ended December 31, 2023, USO held OTC swaps, which are considered Other Oil-Related Investments.

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

expenses and may result in increased tracking error.

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

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Historically, the crude oil futures markets have experienced periods of contango and backwardation, with backwardation being in place somewhat less often than contango since oil futures trading started in 1983.

Following the global financial crisis in the fourth quarter of 2008, the crude oil market moved into contango and remained in contango for a period of several years.

During parts of 2009, the level of contango was unusually steep as a combination of slack U.S.

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

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

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

Following the global financial crisis in the fourth quarter of 2008, the crude oil market moved into contango and remained primarily in contango until 2013.

In 2014, global crude oil inventories grew rapidly after OPEC voted to defend its market share against U.S.

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

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

In March 2020, contango dramatically increased and reached historic levels during the economic crisis arising from the COVID-19 pandemic, related supply chain disruptions and disputes among oil producing countries over the potential limits on the production of crude oil, and a corresponding collapse in demand for crude oil and a lack of on-land storage for crude oil.

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

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Eventually, the United States, OPEC, Russia, and other oil producers around the world agreed to a historic 9.7 million barrel per day cut to crude supply.

The supply cut along with the partial reopening of economies during the third quarter of 2020 reduced some of the unprecedented volatility oil markets experienced in the spring of 2020.

Likewise, contango returned to moderate levels in May 2020.

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

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

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

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

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

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

The supply cut along with the partial reopening of economies during the third quarter of 2020 reduced some of the unprecedented volatility that oil markets experienced in the Spring of 2020.

During the twelve months ended December 31, 2020, the crude oil futures market spent time in both a state of contango and backwardation as measured by the difference between the front month and the second month contract, whereas during the twelve months ended December 31, 2021, the crude oil futures market was primarily in a state of backwardation as measured by the difference between the front month and the second month contract.

During the year ended December 31, 2022, the crude oil futures market experienced states of both contango and backwardation as measured by the difference between the front month and the second month contract, and during the twelve months ended December 31, 2023, the crude oil futures market also experienced states of both mild contango and strong backwardation.

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.

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.

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 2020.

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.

Crude Oil Market .

During the year ended December 31, 2023, the price of the front month WTI crude oil futures contract traded in a range between $66.74 to $93.68.

Prices increased 6.71% from December 31, 2021 through December 31, 2022, finishing the year at $80.26.

Prices decreased (10.73)% from December 31, 2022 through December 31, 2023, finishing the year at $71.65.

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

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The kingdom retaliated with a massive production increase, launching an all-out price war in the middle of a pandemic.

Although the members of OPEC+ reached a record-shattering agreement in mid-April of 2020, the implementation of new supply cuts came too late to prevent crude oil prices from plummeting to historic lows, culminating in a drop into negative territory for the May WTI crude oil futures contract on April 20, 2020.

Although the members of OPEC+ reached a record-shattering agreement in mid-April of 2020, the implementation of new supply cuts came too late to prevent

crude oil prices from plummeting to historic lows, culminating in a drop into negative territory for the May WTI crude oil futures contract on April 20, 2020.

During the second quarter of 2020, the International Energy Agency (IEA) reported that crude oil demand fell an average of 16.4 mbd while global crude oil supply declined by an average of 13.7 mbd.

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

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

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

In 2022, U.S.

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

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

concerns about global economic growth.

These factors continue to affect crude prices.

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

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

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

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

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

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

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

Crude oil prices struggled to find direction during the first half of 2023 with seventeen notable price reversals, most of which exceeded $5.

Prices rose dramatically in the third quarter, from approximately $70 to over $90.

This strong bull market completely reversed in the fourth quarter and by December crude had plunged back to the $70 to $75 range.

crude oil production growth accelerated in late July and rose until the end of the year, finally surpassing pre-pandemic levels and reaching a record of 13.3 mbd in December.

Global crude oil supply rose above demand during the fourth quarter of 2023.

Russia and OPEC have still not returned to pre-pandemic production levels.

OPEC has fiercely supported prices with voluntary cuts by and production quotas on member nations over the last several years.

However, the November 2023 OPEC meeting was tumultuous and left the market uncertain of the cartel’s future commitment to cuts, despite an extension of voluntary cuts and expansion of collective curbs that amounted to 2.2 mbd until March 2024.

Looking ahead, if OPEC’s strategic focus shifts from price support to market share defense, prices could come under further pressure.

Conversely, demand for crude oil has slowly increased since the onset of the pandemic in 2020.

According to the U.S.

Department of Energy, crude oil consumption reached an all-time high at the end of 2023 and is expected to continue increasing in 2024.

However, growth forecasts from the U.S.

Energy Information Administration (EIA) and the International Energy Agency (IEA) have declined from more optimistic projections earlier in 2023.

Nevertheless, ongoing demand growth during a time when OPEC continues to restrain supply could lead to stable or higher prices over time.

Supply constraints, worker shortages, infrastructure and manufacturing energy usage, the Russia-Ukraine war, the terror attacks by Hamas on Israel and ensuing conflict in the Middle East, and other geopolitical tensions, political unrest, and attacks or threats of attack by terrorists, are other factors that could contribute to future increases in crude oil prices.

Conversely, changes in OPEC policy, further non-OPEC production growth, and any sluggishness in the global economy could weigh on prices.

Geopolitical risk is expected to be particularly high in 2024.

The Russia-Ukraine war and Middle East conflict have the potential to create further supply disruptions and sanctions, which could lead to further volatility.

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

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

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

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Crude Oil - 10 Years

Equities (S&P

Bonds (BEUSG4

Equities (FTSE

Correlation Matrix 10 Years

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Bloomberg, NYMEX

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

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Crude Oil - 1 Year

Equities (S&P

US Gov’t Bonds

Equities (FTSE

Correlation Matrix 1 Year

(BEUSG4 Index)

Large Cap US Equities (S&P 500)

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Bloomberg, NYMEX

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

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

During the year ended December 31, 2022, USO’s expenses did not exceeded the income USO earned and the cash earned from the sale of Creation Baskets and the redemption of Redemption Baskets.

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

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

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

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

Commodity pools’ trading positions in futures contracts or other related investments are typically required to be secured by the deposit of margin funds that represent only a small percentage of a futures contract’s (or other commodity interest’s) entire market value.

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

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

Consistent with the foregoing, USO’s investments will take into account the need for USO to make permitted investments that also allow it to maintain adequate liquidity to meet its margin and collateral requirements and to avoid, to the extent reasonably possible, USO becoming leveraged.

If market conditions require it, these risk reduction procedures may occur on short notice if they occur other than during a roll or rebalance period.

During the year ended December 31, 2023, USO’s expenses did not exceed the income USO earned and the cash earned from the sale of Creation Baskets and the redemption of Redemption Baskets.

During the year ended December 31, 2023, USO did not use other assets to pay expenses.

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

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.

If market conditions require it, these risk reduction procedures, including changes to USO’s investments, may occur on short notice.

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.

Such a circumstance could occur if USO were to hold assets that have a value of less than zero.

USO’s investments in Oil Interests may be subject to periods of illiquidity because of market conditions, regulatory considerations and other reasons.

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USO may terminate at any time, regardless of whether USO has incurred losses, subject to the terms of the LP Agreement.

In particular, unforeseen circumstances, including, but not limited to, (i) market conditions, regulatory requirements, risk mitigation measures taken by USO or third parties or otherwise that would lead USO to determine that it could no longer foreseeably meet its investment objective or that USO’s aggregate net assets in relation to its operating expenses or its margin or collateral requirements make the continued operation of USO unreasonable or imprudent, or (ii) adjudication of incompetence, bankruptcy, dissolution, withdrawal or removal of USCF as the general partner of USO could cause USO to terminate unless a majority interest of the limited partners within 90 days of the event elects to continue the partnership and appoints a successor general partner, or the affirmative vote of a majority in interest of the limited partners subject to certain conditions.

However, no level of losses will require USO to terminate USO.

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.

USO’s termination would cause the liquidation and potential loss of an investor’s investment.

22 unchanged sentences

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

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

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

USO may purchase OTC swaps in the future periods, see “Item 3 Quantitative and Qualitative Disclosures About Market Risk” in this annual report on Form 10-K for a discussion of OTC swaps.

As of December 31, 2023, USO held cash deposits and investments in Treasuries and money market funds in the amount of $1,463,696,515 with the custodian and FCMs.

12 unchanged sentences

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

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

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

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

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

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

10 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis