10-Q: Brent Oil Fund Surges on Crude Prices, NAV Jumps 42%

United States Brent Oil Fund, LP reports a substantial 42.84% increase in Net Asset Value per share for the six months ended June 30, 2026, driven by rising Brent crude oil prices, despite unrealized losses on futures contracts.

Summary

• The United States Brent Oil Fund, LP (BNO) reported a significant increase in its Net Asset Value (NAV) per share, rising from $28.29 at the end of 2025 to $40.41 by June 30, 2026, a 42.84% gain over six months.
• This NAV growth was primarily driven by the rise in Brent crude oil prices, with the Benchmark Futures Contract increasing by approximately 19.88% during the same period.
• The fund experienced a substantial unrealized loss of $43,540,680 on open commodity futures contracts as of June 30, 2026.
• Total expenses increased significantly, with management fees rising from $345,952 to $2,023,386 and other expenses excluding management fees increasing from $186,057 to $439,612 for the six-month period.
• The fund's assets grew considerably, from $100,736,709 at the end of 2025 to $544,238,529 by June 30, 2026, with a large portion held in cash and cash equivalents and money market funds.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive filing, reflecting strong performance in NAV growth driven by Brent crude oil price increases, though offset by significant unrealized losses on futures contracts and increased expenses.

Positives

• Net Asset Value (NAV) per share increased by 42.84% to $40.41 for the six months ended June 30, 2026.
• The fund's total assets grew substantially from $100.7 million to $544.2 million.
• The fund's NAV performance (42.84%) outperformed its benchmark's estimated return (41.10%) by 1.74% for the six-month period.
• The Brent crude oil market was in a state of backwardation during the six months ended June 30, 2026, which can be favorable for futures contract roll yields.
• Cash and cash equivalents, along with money market fund investments, represent a significant portion of assets ($585.7 million), providing liquidity.

Negatives

• The fund reported an unrealized loss of $43,540,680 on open commodity futures contracts as of June 30, 2026.
• Total expenses increased significantly, with management fees rising from $345,952 to $2,023,386 and other expenses excluding management fees increasing from $186,057 to $439,612 for the six-month period.
• Dividend and interest income earned on short-term investments decreased from 4.08% to 3.45% on an annualized basis.
• The fund experienced a realized loss of $168,017,070 on closed commodity futures contracts for the three months ended June 30, 2026.

Risks

• The fund is exposed to commodity price risk, specifically Brent crude oil price risk, through its holdings of futures contracts.
• Market volatility due to geopolitical events like conflicts in the Middle East, Russia-Ukraine war, and potential supply chain disruptions can impact commodity prices and the fund's value.
• The fund may lose money by investing in government money market funds, as these are not insured and their share price can fall below $1.00.
• The insolvency of a Futures Commission Merchant (FCM) or custodian could result in the loss of the fund's assets.
• The fund's investment objective is to track daily changes in Brent crude oil futures, and deviations can occur due to expenses, execution prices, and the use of other crude oil-related investments.
• The fund is subject to interest rate risk, where rising interest rates can cause the value of fixed income securities to fall.

Future Outlook

The fund aims to have its daily NAV percentage changes closely track the daily percentage changes of the Benchmark Futures Contract. Management anticipates that fees and expenses paid by BNO may be lower than interest earned, potentially allowing BNO to outperform its benchmark, provided interest earned remains greater than expenses.

Management Comments

• USCF believes that market arbitrage opportunities will cause daily changes in BNOs share price on the NYSE Arca on a percentage basis to closely track daily changes in BNOs per share NAV on a percentage basis.
• USCF believes 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.
• USCF believes that it is not practical to manage the portfolio to achieve an investment goal where the NAV or market price of shares equals the spot price of Brent crude oil or any particular futures contract in dollar terms.
• USCF anticipates that interest rates may continue to stagnate over the near future and expects fees and expenses paid by BNO may be lower than interest earned by BNO.

Industry Context

StockSavvy.ai notes that the fund's performance is directly tied to the volatile Brent crude oil market, which is currently influenced by geopolitical tensions, supply/demand dynamics, and global economic conditions. The fund's strategy of tracking a specific futures contract means its NAV is highly sensitive to the term structure of oil futures (contango/backwardation) and rolling costs.

Comparison to Industry Standards

• The fund's objective is to track the daily percentage changes of the Brent crude oil Benchmark Futures Contract within a 10% band over 30-day periods.
• For the 30-valuation days ended June 30, 2026, the average daily change in the Benchmark Futures Contract was (1.154)%, while BNO's NAV change was (1.145)%, indicating performance within the target tracking goal.
• Over the six months ended June 30, 2026, BNO's actual total return was 42.84%, outperforming its benchmark's estimated return of 41.10% by 1.74%.
• Historically, Brent crude oil has shown varying correlations with other energy commodities (WTI, gasoline, heating oil) and non-commodity asset classes (equities, bonds), with correlations fluctuating significantly over different time periods (1 year vs. 10 years).

Legal Proceedings

• Optimum Strategies Action against USO and USCF was dismissed with prejudice.
• SEC and CFTC investigations resulted in cease-and-desist orders and a $2.5 million civil monetary penalty against USCF and USO.
• In re: United States Oil Fund, LP Securities Litigation is ongoing, with a motion to dismiss pending.
• Mehan Action (derivative) is stayed pending disposition of motions in the related securities litigation.
• In re United States Oil Fund, LP Derivative Litigation is stayed pending disposition of motions in the related securities litigation.

Related Party Transactions

• USCF, the general partner, receives a management fee of 0.75% per annum of average daily total net assets.
• USCF pays marketing agent fees (0.025% of total net assets) and BNY Mellon's fees for custodial, administrative, and transfer agency services.
• USCF also covers website construction and development costs.
• BNO pays brokerage fees and commissions to FCMs, which increased due to higher contract volumes.

Stakeholder Impact

• Shareholders experienced a significant increase in NAV per share, reflecting positive performance in the Brent crude oil market.
• Increased expenses, including management fees and brokerage commissions, may impact overall returns for shareholders.
• Unrealized losses on futures contracts represent a potential downside risk to shareholder value.
• The fund's strategy of tracking futures contracts means that contango and backwardation in the oil market can affect total returns.

Next Steps

• Continue to manage the portfolio to ensure daily percentage changes in NAV closely track daily percentage changes in the Benchmark Futures Contract.
• Monitor market conditions, regulatory requirements, and risk mitigation measures to adjust investments as necessary.
• Publish monthly account statements including Statement of Income (Loss) and Statement of Changes in Net Asset Value.

Key Dates

Recommendation

The fund's performance is highly correlated with Brent crude oil prices, which are subject to significant volatility due to geopolitical and economic factors. While the NAV has shown strong growth, the unrealized losses on futures contracts and increasing expenses present risks. The fund's ability to track its benchmark is generally good, but the inherent volatility of the underlying commodity makes it a hold for investors seeking direct oil exposure without taking on excessive risk.

Keywords

Brent Crude Oil, Futures Contracts, Commodity ETF, Energy Market, ICE Futures Europe, Oil Prices, NAV, Investment Objective