10-K: USL Reports 2025 Performance Amid Oil Market Contango

United States 12 Month Oil Fund, LP (USL) reported a 12.37% decrease in NAV per share for 2025, outperforming its benchmark's estimated 14.17% decline, primarily due to market contango and expenses.

Summary

• USL's investment objective is to track daily percentage changes in the spot price of light, sweet crude oil, as measured by the average of 12 short-term NYMEX crude oil futures contracts (Benchmark Oil Futures Contracts), plus interest earned on collateral holdings, less expenses.
• For the year ended December 31, 2025, USL's per share Net Asset Value (NAV) decreased by 12.37%, from $38.01 to $33.31.
• The average price of the Benchmark Oil Futures Contracts decreased by approximately 18.16% over the year, starting at $69.70 and ending at $57.04 per barrel.
• USL's actual total return of (12.37)% for 2025 outperformed its benchmark's estimated total return of (14.17)% by 1.81%.
• The crude oil futures market experienced contango during 2025, a condition where near-month contracts trade at a lower price than next-month contracts, which generally negatively impacts returns for funds rolling positions.
• USL held 1,100,000 shares outstanding as of December 31, 2025, a decrease from 1,300,000 shares at December 31, 2024.
• Total expenses paid or accrued by USL from inception through December 31, 2025, were $16,374,086, representing an annualized 0.84% of average daily net assets.
• During 2025, USL issued 2 Creation Baskets (100,000 shares) and redeemed 6 Redemption Baskets (300,000 shares).

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a challenging year for USL due to significant declines in crude oil prices and market contango, resulting in a net loss and reduced assets. However, the fund effectively managed to outperform its benchmark and maintain strong tracking, indicating operational efficiency despite adverse market conditions.

Positives

• USL's actual total return of (12.37)% for the year ended December 31, 2025, outperformed its benchmark's estimated total return of (14.17)% by 1.81%.
• The average daily tracking difference for the 30-valuation days ended December 31, 2025, was 0.012%, which is well within the stated objective of plus/minus ten percent (10%).
• Since the commencement of its offering on December 6, 2007, to December 31, 2025, USL's average daily tracking difference was 0.002%, demonstrating strong long-term tracking.
• Interest and dividend income earned by USL ($1,724,700 in 2025) exceeded its total expenses ($431,394 in 2025), contributing positively to NAV performance relative to the benchmark.
• USL maintains effective internal control over financial reporting as of December 31, 2025, as assessed by its management and confirmed by its independent auditors.
• USL has an unlimited number of shares available for issuance, following the SEC's declaration of effectiveness for its registration statement on April 28, 2023.

Negatives

• USL's per share NAV decreased by 12.37% in 2025, from $38.01 to $33.31.
• The average price of the Benchmark Oil Futures Contracts decreased by 18.16% in 2025, from $69.70 to $57.04 per barrel.
• The crude oil futures market was in a state of contango during 2025, which generally has a negative impact on total returns for funds that roll futures contracts.
• Average daily total net assets decreased significantly to $42,847,605 in 2025 from $60,463,986 in 2024.
• Dividend and interest income earned decreased to $1,724,700 in 2025 from $2,937,210 in 2024, and the annualized yield based on average daily total net assets fell to 4.03% from 4.86%.
• USL reported a net loss of $5,764,786 in 2025, a reversal from the net income of $5,056,744 in 2024.
• Net income (loss) per limited partner share was $(4.70) in 2025, compared to $2.78 in 2024.
• The number of outstanding shares decreased from 1,300,000 to 1,100,000, indicating net redemptions.
• RBC Capital Markets, LLC, one of USL's Futures Commission Merchants (FCMs), has been involved in significant legal proceedings, including LIBOR litigation settlements totaling over $106 million, a $45 million SEC settlement for records preservation, and a FINRA disciplinary action resulting in a $375,000 fine and $393,833.50 in restitution.
• Marex Capital Markets, Inc. (MCM), another FCM, has been involved in various private litigations and arbitrations, including a judgment in its favor for $1,762,266.57 plus fees and costs in one case, and ongoing litigation in another.
• ADM Investor Services, Inc. (ADMIS), another FCM, has faced multiple disciplinary actions and fines from the CFTC and various Business Conduct Committees (totaling $1.6 million) for supervision failures and inaccurate reporting.
• USCF, USL's general partner, is currently subject to class action, derivative, and other litigation, which could materially adversely affect its financial condition and divert management attention and resources.

Risks

• The NAV of USL's shares relates directly to the daily changes in the average prices of the Benchmark Oil Futures Contracts and other assets, and fluctuations could materially adversely affect an investment.
• Price volatility, driven by factors like the COVID-19 pandemic, the Russia-Ukraine war, disputes among oil-producing countries, and trade barriers, may cause the total loss of an investment.
• Natural disasters, public health disruptions, and international armed conflicts could impact crude oil prices and the value, pricing, and liquidity of USL's investments, potentially leading to substantial losses.
• An investment in USL may provide little or no diversification benefits, meaning losses in USL may not be offset by gains in other asset classes during a declining market.
• The market price at which investors buy or sell shares may be significantly less or more than NAV due to supply and demand forces and non-concurrent trading hours between NYSE Arca and futures exchanges.
• Daily percentage changes in USL's NAV may not closely correlate with daily percentage changes in the average prices of the Benchmark Oil Futures Contracts due to market disruptions, regulatory limits, or investment in Other Oil-Related Investments.
• Natural market forces like contango and backwardation can increase USL's tracking error and negatively impact total return, especially prolonged periods of contango.
• Accountability levels, position limits, and daily price fluctuation limits set by exchanges and the CFTC's Position Limits Rule can cause tracking error by restricting USL's ability to fully invest in Benchmark Oil Futures Contracts.
• Risk mitigation measures imposed by USL's FCMs could limit USL's investments, leading to tracking error.
• Investors' tax liability may exceed the amount of distributions, as USL does not intend to make cash distributions, requiring investors to pay taxes on allocated income without corresponding cash.
• USL could be treated as a corporation for U.S. federal income tax purposes, which may substantially reduce the value of the shares.
• USL is subject to credit risk with respect to counterparties to OTC contracts, as a counterparty's non-performance could lead to significant losses.
• Valuing OTC derivatives may be less certain than valuing exchange-traded instruments due to individual negotiation and lack of contractual quoting obligations.
• USL could become leveraged if it holds insufficient assets to meet current or future margin or collateral obligations.
• Temporary limits on the offering of Creation Baskets could cause USL's NAV to differ materially from its trading price and increase trading costs for investors.
• Certain of USL's investments could be illiquid, leading to large losses, particularly during market disruptions or if daily price limits are reached on exchanges.
• USL is not actively managed by conventional methods, meaning it will not close out declining positions except for redemptions or monthly rolls.
• Failure to meet NYSE Arca listing standards or trading halts could adversely impact an investor's ability to sell shares.
• The withdrawal of Authorized Participants could decrease the liquidity of USL's shares and adversely affect their market price.
• Limited partners do not participate in the management of USL and do not control USCF, relying on USCF's judgment.
• USCF's LLC Agreement provides limited authority to Non-Management Directors, and USCF's parent company (controlled by Nicholas D. Gerber) can remove any Director, potentially impacting governance.
• USL may not earn trading gains sufficient to compensate for its fees and expenses, potentially resulting in no profit.
• USL is subject to extensive regulatory reporting and compliance, and sanctions for non-compliance could adversely affect its financial performance or investment objective.
• Regulatory changes or actions, including new legislation, are impossible to predict but may significantly and adversely affect USL.
• USL is not a registered investment company, so shareholders do not have the protections afforded by the 1940 Act.
• Trading in international markets could expose USL to credit and regulatory risk, as well as adverse exchange-rate movements.
• USL and USCF may have conflicts of interest, potentially favoring their own interests to the detriment of shareholders.
• USL could terminate at any time, causing the liquidation and potential loss of an investor's investment.
• An unanticipated number of Redemption Basket requests during a short period could have an adverse effect on USL's NAV.
• USL is subject to interest rate risk, which may prevent it from investing fully at prevailing rates until current investments in Treasuries mature, or lead to declines in Treasury values in rising rate environments.
• Inflation increases erode the value of cash and Treasury investments.
• USL may potentially lose money by investing in government money market funds, as they are not guaranteed and their share price can fall below $1.00.
• The failure or bankruptcy of a clearing broker or USL's custodian could result in a substantial loss of USL's assets.
• Competing claims of intellectual property rights may adversely affect USL.
• Intentional and unintentional cyber-attacks pose operational and information security risks, potentially leading to financial losses, inability to transact business, regulatory fines, and reputational damage.
• USL's investment returns could be negatively affected by climate change and greenhouse gas restrictions, making oil and natural gas products more expensive or less competitive.

Future Outlook

USCF anticipates that interest rates may continue to stagnate in the near future, and that USL's fees and expenses may remain lower than interest earned, potentially leading to USL outperforming its benchmark. However, contango in the crude oil futures market may persist, potentially at extreme levels, due to ongoing uncertainty from the COVID-19 crisis. Global tensions and conflicts continue to pose risks to crude oil supply, which could raise prices, while any resolution could ease disruptions and lower prices. U.S. crude oil production growth may moderate, and broader economic slowdowns or recessions due to trade policies could reduce crude oil demand.

Management Comments

• USCF believes that market arbitrage opportunities will cause daily changes in USL's share price on the NYSE Arca on a percentage basis to closely track daily changes in USL's per share NAV on a percentage basis.
• USCF further believes that the daily changes in the average prices of the Benchmark Oil Futures Contracts have historically tracked the daily changes in 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 USL'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 USL's collateral holdings, less USL's expenses.
• USCF believes that it is not practical to manage the portfolio to achieve an investment goal where its NAV or market price equals, in dollar terms, the spot price of light, sweet crude oil or any particular futures contract.
• USCF anticipates that interest rates may continue to stagnate over the near future. It is anticipated that fees and expenses paid by USL may continue to be lower than interest earned by USL. As such, USCF anticipates that USL could possibly outperform its benchmark so long as interest earned is greater than fees and expenses paid by USL.
• USCF believes that holding futures contracts whose expiration dates are spread out over a 12-month period will cause the total return of such a portfolio to vary compared to a portfolio that holds only a single month's contract.
• USCF believes that based on historical evidence, a portfolio that held futures contracts with a range of expiration dates spread out over a 12-month period would typically be impacted less by the positive effect of backwardation, and less by the negative effect of contango, compared to a portfolio that held contracts of a single near month.
• USCF believes that crude oil has historically not demonstrated a strong correlation with equities or bonds over long periods of time.

Industry Context

StockSavvy.ai notes that the crude oil market in 2025 was characterized by growing supplies exceeding demand, leading to a significant widening of the excess supply gap from 0.6 mbd at the end of 2024 to 2.8 mbd by the end of 2025. U.S. crude oil production averaged 13.5 mbd, continuing a significant rise over the last five years. OPEC production increased from 27.5 mbd to 29.0 mbd in 2025, but remained below preand post-pandemic highs, with the cartel unwinding voluntary cuts. Geopolitical tensions, such as the Israel-U.S. attack on Iran's nuclear facilities in June 2025, briefly spiked prices, but prices fell back as the Strait of Hormuz remained open. The ongoing conflicts in Ukraine and the Middle East continue to introduce uncertainty regarding future supply. The persistence of contango in the futures market, potentially at extreme levels, is a notable trend impacting commodity-linked funds.

Comparison to Industry Standards

• The fund's objective is to track the Benchmark Oil Futures Contracts within a +/10% range over 30 successive valuation days. For the 30-valuation days ended December 31, 2025, the average daily change in USL's NAV was (0.118)% compared to the Benchmark's (0.130)%, resulting in a 0.012% difference, which is within the stated objective.
• USL's actual total return of (12.37)% for 2025 outperformed the estimated benchmark return of (14.17)% by 1.81%, suggesting effective management of expenses and interest income relative to the benchmark's pure price movement.
• The discussion of contango and backwardation highlights a common challenge for commodity futures funds, where rolling contracts can lead to underperformance relative to spot prices, a factor inherent to the structure of such funds rather than a deviation from industry standards.

Management Changes

Corporate Governance

Legal Proceedings

• The Optimum Strategies Action, a class action against USO and USCF, was dismissed with prejudice for federal claims on March 15, 2023, with no appeal filed.
• USCF and USO resolved SEC and CFTC investigations on November 8, 2021, resulting in cease-and-desist orders and civil monetary penalties totaling $2,500,000.
• The Lucas Class Action, a consolidated class action against USCF, USO, and others, had its motion to dismiss granted without prejudice on September 29, 2025, with a plaintiff's motion to amend pending as of November 26, 2025.
• The Wang Class Action against USO, USCF, and others was voluntarily dismissed on August 4, 2020.
• The Mehan Action and In re United States Oil Fund, LP Derivative Litigation (Cantrell and AML Actions) against USCF and others are stayed pending the disposition of motions to dismiss in the Lucas Class Action.
• RBC Capital Markets, LLC (an FCM) settled LIBOR class actions for over $106 million, an SEC investigation for $45 million, and a FINRA disciplinary action for a $375,000 fine and $393,833.50 restitution. It also faces ongoing individual LIBOR actions and a conviction in French court for an affiliate, which is under appeal.
• Marex Capital Markets, Inc. (an FCM) was involved in several litigations, including a favorable judgment of $1,762,266.57 in one private case, a settled JAMS arbitration, and a denied petition to vacate a FINRA arbitration award. It also has ongoing litigation in Illinois.
• ADM Investor Services, Inc. (an FCM) faced multiple disciplinary actions and fines from the Commodity Exchange Business Conduct Committee Panel ($650,000), the CFTC ($500,000), and other CME Group Business Conduct Committees (totaling $450,000 across three cases) for supervision failures and inaccurate reporting.

Related Party Transactions

• USL is contractually obligated to pay USCF a management fee equal to 0.60% per annum of its average daily total net assets.
• USCF pays the fees of ALPS Distributors, Inc. (Marketing Agent) and The Bank of New York Mellon (Administrator, Custodian, Transfer Agent) for services provided to USL.
• USL pays a licensing fee to the NYMEX (0.015% on net assets) for the use of its settlement prices and service marks.
• USL pays a pro rata portion of the fees and expenses of the independent directors of USCF.
• USCF's officers, directors, and employees also serve other entities that may compete with USL, creating potential conflicts of interest.
• USCF serves as the general partner or sponsor to USL and several Related Public Funds, which may lead to conflicts in trading decisions due to position limits.
• USCF's principals, officers, directors, or employees may trade futures and related contracts for their own accounts, potentially creating conflicts of interest.
• USCF Investments, Inc., the sole member of USCF, is a wholly-owned subsidiary of The Marygold Companies, Inc., where Nicholas D. Gerber and certain family members own a majority of shares, granting them indirect control over USCF and its board.

Stakeholder Impact

• Shareholders experienced a 12.37% decrease in NAV per share in 2025, but USL outperformed its benchmark by 1.81%.
• Shareholders may incur tax liability exceeding distributions, as USL does not intend to make cash distributions.
• Shareholders are exposed to various market, correlation, and liquidity risks, as well as risks related to FCM and custodian failures.
• USCF, as the general partner, receives management fees and is responsible for USL's operations, but faces significant legal and regulatory challenges that could impact its financial condition and resource allocation.
• FCMs (RBC Capital, Marex Capital, ADMIS) receive brokerage commissions from USL but have been subject to substantial fines and settlements due to regulatory violations and legal proceedings, indicating potential operational and reputational risks.
• Regulatory bodies (SEC, CFTC, FINRA, NYSE Arca) continue to actively oversee USL and its service providers, imposing compliance requirements and taking enforcement actions.
• USCF's management and employees are experiencing a diversion of time and attention to compliance-related activities and litigation, potentially impacting operational efficiency.

Next Steps

• USCF will continue to manage USL's portfolio to track the Benchmark Oil Futures Contracts.
• USCF will continue to monitor and manage risks, including those related to market conditions, regulatory limits, and FCM risk mitigation measures.
• USCF will continue to evaluate its cybersecurity risk profile no less frequently than annually.
• USCF and other defendants intend to vigorously contest claims in ongoing litigation (In re: United States Oil Fund, LP Securities Litigation and In re United States Oil Fund, LP Derivative Litigation).

Key Dates

Recommendation

USL experienced a significant decline in NAV and a net loss in 2025, reflecting adverse crude oil market conditions, particularly contango. While the fund commendably outperformed its benchmark and maintained strong tracking, the underlying market volatility and the general partner's and FCMs' extensive legal and regulatory issues present considerable uncertainty. The fund's structure, which does not distribute cash, also creates a tax burden for investors. Given the challenging market environment and ongoing operational and legal risks, a 'hold' recommendation is appropriate for existing investors to monitor market conditions and the resolution of legal matters, while new investors should exercise extreme caution due to the inherent volatility and structural complexities.

Keywords

Crude Oil, Futures Contracts, Commodity Pool, USL, USCF, NYSE Arca, WTI, Oil Futures, Energy ETF, Investment Fund, Contango, Backwardation, SEC Filing, 10-K, Financial Performance, Risk Management, Commodity Trading, Financial Reporting, Oil Market, Derivatives, Liquidity, Regulatory Compliance