10-Q: United States 12 Month Oil Fund (USL) Reports 15.07% NAV Increase in First Half of 2024

The United States 12 Month Oil Fund (USL) saw its net asset value (NAV) per share increase by 15.07% in the first half of 2024, driven by rising crude oil futures prices.

Summary

• The United States 12 Month Oil Fund, LP (USL) reported its financial results for the second quarter and six months ended June 30, 2024.
• The fund's investment objective is to track the daily changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the average of prices of 12 near-term futures contracts.
• USL's per share NAV increased from $35.23 at the beginning of the year to $40.54 as of June 30, 2024, representing a 15.07% increase.
• For the 30-valuation days ended June 30, 2024, the average daily change in the Benchmark Oil Futures Contracts was 0.125%, while the average daily change in the per share NAV of USL over the same time period was 0.142%.
• The average daily difference was 0.017% (or 1.7 basis points).
• The fund held 835 Oil Futures Contracts for light, sweet crude oil traded on the NYMEX as of June 30, 2024.
• The average price of the Benchmark Oil Futures Contracts increased 8.88% during the first six months of 2024.
• The fund's management fee is 0.60% per annum of average daily total net assets.
• USL did not incur registration fees and other offering expenses for the six months ended June 30, 2024 and 2023.
• The fund is exposed to market risk and credit risk related to its trading in oil futures contracts and other oil-related investments.
• USL has an unlimited number of shares registered and available for issuance.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook due to the increase in NAV and the fund's ability to track its benchmark. However, it also acknowledges the risks associated with the fund's investments and the potential for future volatility.

Positives

• USL's NAV increased by 15.07% in the first half of 2024, indicating positive performance.
• The fund's tracking of its benchmark was within the target range, with an average daily difference of 0.017% for the 30-valuation days ended June 30, 2024.
• USL has an unlimited number of shares registered and available for issuance, providing flexibility for future growth.
• Average interest rates earned on short-term investments held by USL, including cash, cash equivalents and Treasuries, were higher during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Negatives

• The fund is exposed to market risk and credit risk related to its trading in oil futures contracts and other oil-related investments.
• The fund's performance is subject to the impact of contango and backwardation in the crude oil futures market.
• USL's expenses, including the management fee, brokerage commissions, and other expenses, can impact its ability to perfectly track its benchmark.
• The fund's performance is subject to geopolitical risks and potential supply disruptions in the crude oil market.

Risks

• Market volatility in the crude oil markets and futures markets, attributable to factors such as the COVID-19 pandemic, the Russia-Ukraine war, and conflicts in the Middle East, could affect the value, pricing, and liquidity of USL's investments.
• Geopolitical risks, including the Russia-Ukraine war and Middle East conflict, have the potential to create further supply disruptions and sanctions, which could lead to further volatility.
• The fund is exposed to credit risk that the counterparty will not be able to meet its obligations.
• USL may potentially lose money by investing in government money market funds.
• In a rising rate environment, USL 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.

Future Outlook

The report discusses factors that could influence future crude oil prices, including OPEC policy, non-OPEC production growth, global economic conditions, and geopolitical risks.

Industry Context

The report provides context on the crude oil market, including the impact of the COVID-19 pandemic, the Russia-Ukraine war, and OPEC production decisions on crude oil prices and volatility.

Comparison to Industry Standards

• The report compares the monthly movements of crude oil prices versus the monthly movements of the prices of several other energy commodities, such as natural gas, diesel-heating oil, and unleaded gasoline, as well as several major non-commodity investment asset classes, such as large cap U.S. equities, U.S. government bonds and global equities.
• The report references the performance of the S&P 500, BEUSG4 Index (US Govt Bonds), and FTSE World Index (Global Equities) in relation to crude oil price movements.
• The report mentions the International Energy Agency (IEA) reports on crude oil demand and supply.
• The report references WTI crude oil prices and inventories in the United States.

Legal Proceedings

• USL and USCF were named as defendants in an action filed by Optimum Strategies Fund I, LP, but the court granted the USO defendants motion to dismiss the complaint.
• USCF and USO reached a resolution with the SEC and the CFTC relating to matters set forth in certain Wells Notices.
• USCF, USO, and certain individuals were named as defendants in a putative class action filed by Robert Lucas, which has been consolidated with related actions and is pending in the U.S. District Court for the Southern District of New York.
• A derivative action was filed on behalf of nominal defendant USO against defendants USCF and certain individuals, which is stayed pending disposition of the motion(s) to dismiss in In re: United States Oil Fund, LP Securities Litigation.
• Two separate derivative actions were filed on behalf of nominal defendant USO against defendants USCF and certain individuals, which have been consolidated and are stayed pending disposition of the motion(s) to dismiss in In re: United States Oil Fund, LP Securities Litigation.

Related Party Transactions

• USCF receives a management fee calculated daily and paid monthly as a fixed percentage of USL's NAV, currently 0.60% of NAV on its average daily total net assets.
• USCF pays the fees of the Marketing Agent as well as BNY Mellon's fees for performing administrative, custodial, and transfer agency services.
• USCF and USL have entered into a licensing agreement with the NYMEX pursuant to which USL and the Related Public Funds, other than BNO, USCI and CPER, pay a licensing fee to the NYMEX.
• USL also pays a portion of the fees and expenses of the independent directors of USCF.

Stakeholder Impact

• The fund's performance directly impacts its shareholders, as the value of their shares is tied to the fund's NAV.
• The fund's ability to track its benchmark is important for investors who seek exposure to the crude oil market.
• The fund's expenses, including the management fee, brokerage commissions, and other expenses, reduce the returns available to shareholders.
• The fund's legal proceedings could potentially impact its financial performance and reputation.

Key Dates

Keywords

oil futures, crude oil, USL, United States 12 Month Oil Fund, NAV, commodity pool, futures contracts, NYMEX, oil-related investments, contango, backwardation