10-Q: Brent Oil Fund Reports Q3 2025 Results Amid Volatile Market

United States Brent Oil Fund, LP reports a net income of $1.4 million for the nine months ended September 30, 2025, outperforming its benchmark despite declining assets and volatile Brent crude prices.

Summary

• Net income for the nine months ended September 30, 2025, was $1,403,960, a significant improvement from a net loss of $1,644,068 in the prior year period.
• Total assets decreased to $102,248,272 as of September 30, 2025, from $114,873,867 at December 31, 2024.
• Partners Capital declined to $101,981,085 at September 30, 2025, from $114,528,171 at December 31, 2024.
• Net asset value (NAV) per share decreased to $29.99 at September 30, 2025, from $30.14 at December 31, 2024.
• The fund's actual total return for the nine months ended September 30, 2025, was (0.50)%, outperforming its benchmark's estimated total return of (2.66)% by 2.17%.
• Average daily total net assets decreased to $97,744,421 for the nine months ended September 30, 2025, from $146,982,835 in the prior year period.
• Cash flow from operating activities significantly increased to $5,703,212 for the nine months ended September 30, 2025, compared to $899,239 in the prior year.
• Net cash used in financing activities was $13,951,046 for the nine months ended September 30, 2025, primarily due to higher redemptions ($97,534,973) compared to additions ($83,583,927) of partnership shares.
• Brent crude oil futures prices were volatile, decreasing by approximately 10.21% from December 31, 2024, to September 30, 2025, ending the period at $67.02 per barrel.
• The fund maintained its benchmark tracking goal, with the average daily change in BNO's per share NAV being 0.047% compared to the Benchmark Futures Contract's 0.036% for the 30-valuation days ended September 30, 2025.

Sentiment

Score: 4

Explanation: The fund's absolute financial performance, including declining assets, NAV, and net cash from financing, is negative. While it achieved a net income and outperformed its benchmark, the benchmark itself was negative, reflecting an unfavorable underlying commodity market. Geopolitical and market volatility risks remain significant.

Positives

• Net income for the nine months ended September 30, 2025, improved significantly to $1,403,960 from a net loss of $1,644,068 in the same period of 2024.
• The fund's actual total return of (0.50)% for the nine months ended September 30, 2025, outperformed its Benchmark Futures Contract's estimated total return of (2.66)% by 2.17%.
• Cash flows from operating activities increased substantially to $5,703,212 for the nine months ended September 30, 2025, from $899,239 in the prior year.
• Total expenses decreased for both the three and nine months ended September 30, 2025, primarily due to lower commissions and professional fees.
• The fund successfully tracked its benchmark, with the average daily change in NAV within the plus or minus 10% range of the Benchmark Futures Contract over the 30-valuation day period and since inception.

Negatives

• Total assets decreased by approximately 11% to $102.25 million at September 30, 2025, from $114.87 million at December 31, 2024.
• Partners Capital decreased by approximately 11% to $101.98 million at September 30, 2025, from $114.53 million at December 31, 2024.
• Net asset value per share declined to $29.99 at September 30, 2025, from $30.14 at December 31, 2024.
• The fund experienced a net decrease in cash and cash equivalents of $8,247,834 for the nine months ended September 30, 2025, compared to a net increase of $88,798,189 in the prior year, largely due to net redemptions of partnership shares.
• Dividend and interest income earned on short-term investments decreased significantly for both the three and nine months ended September 30, 2025, compared to the prior year periods.
• The Brent crude oil futures market experienced a decrease of approximately 10.21% from December 31, 2024, through September 30, 2025, indicating an unfavorable underlying commodity market.

Risks

• Market risk arising from changes in the market value of commodity futures contracts, with potential for unlimited liability on short contracts.
• Credit risk from counterparty failure in OTC swaps, FCM insolvency, or custodian failure, potentially leading to loss of deposited assets.
• Impact of contango and backwardation on total returns, which can cause the fund's performance to underperform or outperform the spot price of Brent crude oil.
• Geopolitical conflicts (e.g., Russia-Ukraine war, Middle East conflicts), natural disasters, and public health disruptions (e.g., COVID-19 pandemic) causing volatility in Brent crude oil prices and affecting investment value and liquidity.
• Interest rate risk, where changes in interest rates can cause fixed income securities and other investments to fluctuate in value, potentially leading to losses.
• Inflation risk, as increasing inflation can erode the value of cash and Treasury investments, causing the present value of assets to decline.
• Risk of loss from investing in government money market funds, as they are not guaranteed and their share price can fall below $1.00.
• Regulatory changes, including accountability levels and position limits imposed by exchanges (NYMEX, ICE Futures), which could force the fund to reduce holdings and cause tracking error.
• Liquidity risk, where daily price limits on commodity exchanges could prevent the fund from promptly liquidating its positions.
• OTC contract risk, including less certainty in valuation, increased liquidity risk, and potential difficulty in modifying or terminating highly customized or leveraged transactions.
• Potential for the fund to become leveraged if it holds insufficient assets to meet current and future margin or collateral obligations.
• Termination risk of the fund under unforeseen circumstances, which could lead to liquidation and potential loss of investor capital.

Future Outlook

Management anticipates that interest rates may continue to stagnate in the near future. It is expected that fees and expenses paid by the fund may be lower than interest earned, potentially leading to the fund outperforming its benchmark as long as interest earned exceeds fees and expenses. However, the overall impact of global economic slowdowns, geopolitical conflicts, and trade policy uncertainties could reduce demand for crude oil and cause price volatility.

Management Comments

• We believe that market arbitrage opportunities will cause daily changes in BNO's share price on the NYSE Arca on a percentage basis to closely track daily changes in BNO's per share NAV on a percentage basis.
• We believe that the daily changes in the price of the Benchmark Futures Contract have historically tracked the daily changes in the spot price of Brent crude oil.
• We anticipate that interest rates may continue to stagnate over the near future. It is anticipated that fees and expenses paid by BNO may be lower than interest earned by BNO. As such, we anticipate that BNO could possibly outperform its benchmark so long as interest earned is greater than the fees and expenses paid by BNO.
• USCF, USO, and the other defendants intend to vigorously contest any claims in ongoing legal proceedings.

Industry Context

The Brent crude oil market experienced significant volatility and a price decrease of over 10% during the nine months ended September 30, 2025. The market was in a state of backwardation, where near-month futures contracts were priced higher than later-month contracts. Geopolitical events, including the Israel-U.S. attack on Iran's nuclear facilities and the Trump administration's tariffs, contributed to market uncertainty and price fluctuations. OPEC's gradual unwinding of voluntary production cuts and increasing quotas also influenced supply dynamics, moving the 'OPEC put' (price floor) lower. U.S. crude oil production continued to rise, making the U.S. the world's largest producer, further impacting global supply-demand balances.

Comparison to Industry Standards

• BNO's average daily change in NAV of 0.047% for the 30-valuation days ended September 30, 2025, was within the target range of 90% to 110% of the Benchmark Futures Contract's average daily change of 0.036%, demonstrating effective tracking.
• For the nine months ended September 30, 2025, BNO's actual total return of (0.50)% outperformed the Benchmark Futures Contract's estimated total return of (2.66)%, indicating strong relative performance against its primary benchmark.
• Historically, Brent crude oil has not demonstrated a strong correlation with large cap U.S. equities (S&P 500) or U.S. government bonds (BEUSG4 Index) over long periods, with correlations of 0.410 and (0.292) respectively over 10 years, suggesting diversification benefits.
• Brent crude oil showed strong positive correlation with other energy commodities over 10 years, including WTI crude oil (0.915), unleaded gasoline (0.795), and heating oil (0.777), reflecting integrated energy market dynamics.
• Over the most recent one-year period, Brent crude oil maintained high correlations with WTI crude oil (0.968), unleaded gasoline (0.721), and heating oil (0.817), consistent with long-term trends in the energy sector.

Corporate Governance

Legal Proceedings

• The Optimum Strategies Action against USO and USCF, alleging securities violations, was dismissed with prejudice on March 15, 2023, with no notice of appeal filed.
• USCF and USO settled SEC and CFTC investigations on November 8, 2021, for violations related to market conditions in 2020, resulting in civil monetary penalties totaling $2.5 million.
• The In re: United States Oil Fund, LP Securities Litigation (Lucas Class Action) against USCF, USO, and others had its motion to dismiss granted on September 29, 2025, without prejudice, with the plaintiff granted leave to amend the complaint by November 26, 2025.
• The Wang Class Action, asserting federal securities claims 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), derivative actions against USCF, USO, and individuals, are stayed pending the final disposition of the motions to dismiss in the Lucas Class Action.

Related Party Transactions

• USCF, as the General Partner, receives a management fee equal to 0.75% per annum of average daily total net assets, paid monthly.
• USCF pays the fees of the Marketing Agent (ALPS Distributors, Inc.) and The Bank of New York Mellon for administrative, custodial, and transfer agency services.
• BNO shares fees and expenses for independent directors and officers liability insurance on a pro rata basis with Related Public Funds, estimated at $48,000 for BNO for the year ending December 31, 2025.

Stakeholder Impact

• Shareholders experienced a decrease in Net Asset Value per share and a negative total return for the nine-month period, although the fund outperformed its benchmark.
• Authorized Participants continue to facilitate creation and redemption of shares in blocks of 50,000, paying a $350 transaction fee per order.
• The fund's ability to meet its investment objective and manage risks directly impacts investor confidence and potential returns.
• Ongoing legal proceedings, particularly the class action lawsuits against USO and USCF, could have implications for the General Partner and potentially other related funds, though BNO is not directly a defendant in the active class action.

Next Steps

• The plaintiff in the In re: United States Oil Fund, LP Securities Litigation has until November 26, 2025, to move to amend the complaint after the court granted a motion to dismiss without prejudice.
• Management will continue to monitor its exposure to market and counterparty risk through financial, position, and credit exposure reporting controls and procedures.
• The fund will continue to manage its portfolio to track the Benchmark Futures Contract, aiming for average daily NAV changes within +/10% of the benchmark over 30-valuation day periods.

Key Dates

Recommendation

While the United States Brent Oil Fund, LP demonstrated effective management by outperforming its benchmark for the nine months ended September 30, 2025, the absolute performance was negative, with a decline in NAV per share, total assets, and partners' capital. The underlying Brent crude oil market remains volatile and subject to significant geopolitical and economic risks, including potential global slowdowns and ongoing supply-demand shifts. The fund's operational efficiency in tracking its benchmark and controlling expenses is a positive, but the unfavorable market conditions for its core asset class warrant a cautious stance. Investors should hold their positions, monitoring the crude oil market dynamics and the fund's continued ability to mitigate losses relative to the benchmark.

Keywords

Brent crude oil, commodity fund, futures contracts, SEC filing, 10-Q, energy market, investment performance, financial results, market risk, contango, backwardation, geopolitical risk, inflation, USCF, NYSE Arca