10-Q: United States 12 Month Oil Fund (USL) Reports Q1 2024 Results: NAV Up Amidst Oil Market Volatility

United States 12 Month Oil Fund (USL) reports an increase in net asset value (NAV) per share for the quarter ended March 31, 2024, driven by gains in commodity futures contracts.

Summary

• United States 12 Month Oil Fund, LP (USL) is a commodity pool that issues limited partnership interests (shares) traded on the NYSE Arca.
• The investment objective of USL is for the daily changes in percentage terms of its per share net asset value (NAV) to reflect the daily changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma.
• As of March 31, 2024, USL held 809 Oil Futures Contracts for light, sweet crude oil traded on the NYMEX.
• For the three months ended March 31, 2024, USL reported a net income of $8,273,478, or $4.76 per limited partner share.
• USLs per share NAV increased from $35.23 at the beginning of the period to $39.99 at the end of the period.
• The fund's total net assets were $63,990,283 as of March 31, 2024, compared to $66,936,781 at the beginning of the period.
• The average price of the Benchmark Oil Futures Contracts increased 10.80% over the period.
• The actual total return of USL as measured by changes in its per share NAV was 13.51% for the three months ended March 31, 2024.
• USCF seeks to manage the portfolio such that over any rolling period of 30-valuation days, the average daily change in USLs per share NAV is within a range of 90% to 110% of the average daily change in the prices of the Benchmark Oil Futures Contracts.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to the increase in NAV and positive net income, but tempered by the inherent risks of commodity investing and the volatility of the oil market.

Positives

• USL achieved a positive net income of $8,273,478 for the quarter.
• The fund's NAV per share increased by $4.76 during the quarter.
• USL's actual total return outperformed its benchmark by 1.11% for the three months ended March 31, 2024.
• Average interest rates earned on short-term investments held by USL were higher during the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

Negatives

• The fund experienced a decrease in total net assets from $66,936,781 to $63,990,283 during the quarter.
• USL redeemed 300,000 partnership shares during the quarter.
• Crude oil futures prices were volatile during the three months ended March 31, 2024.

Risks

• USL is exposed to commodity price risk, particularly crude oil price risk.
• The fund is subject to market risk and credit risk associated with trading in futures contracts and other oil-related investments.
• Geopolitical risks, including the Russia-Ukraine war and Middle East conflict, could lead to further supply disruptions and volatility.
• Infectious disease outbreaks like COVID-19 could negatively affect the valuation and performance of USL's investments.
• USL may potentially lose money by investing in government money market funds.

Future Outlook

USCF anticipates that interest rates may continue to stagnate over the near term and that fees and expenses paid by USL may continue to be lower than interest earned by USL, potentially leading to outperformance of its benchmark.

Industry Context

The report provides insight into the performance of a commodity pool focused on crude oil futures, reflecting the impact of market volatility, contango/backwardation, and geopolitical events on investment returns in the energy sector.

Comparison to Industry Standards

• It is difficult to compare USL's performance directly to other commodity funds without knowing their specific investment strategies and benchmark indices.
• However, similar funds like the United States Oil Fund (USO) and the Invesco DB Oil Fund (DBO) also invest in crude oil futures contracts and are subject to similar market risks.
• USL's strategy of holding futures contracts with expiration dates spread out over 12 months is designed to mitigate the impact of contango and backwardation compared to funds that focus solely on the near-month contract.
• The report's discussion of correlation between crude oil and other asset classes provides context for investors seeking to diversify their portfolios.

Legal Proceedings

• USL may be involved in legal proceedings arising primarily out of the ordinary course of business.
• USCF, as the general partner of USL and the Related Public Funds may, from time to time, be involved in litigation arising out of its operations in the ordinary course of business.
• The Optimum Strategies Action was dismissed with prejudice.
• USCF and USO settled with the SEC and CFTC, paying civil monetary penalties.
• The Lucas Class Action and related derivative litigation are ongoing.
• The Wang Class Action was voluntarily dismissed.
• The Mehan Action is 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 as a percentage of USL's NAV.
• USCF pays the fees of the Marketing Agent and BNY Mellon for various services.
• USL and the Related Public Funds pay a licensing fee to the NYMEX.

Stakeholder Impact

• Shareholders are impacted by the fund's performance, which is tied to the price of crude oil futures contracts.
• Authorized Participants are affected by the creation and redemption fees and procedures.
• The fund's operations have implications for the broader oil market and related industries.

Key Dates

Keywords

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