10-Q: United States Brent Oil Fund Reports Net Income of $20.8 Million for Six Months Ended June 30, 2024

United States Brent Oil Fund (BNO) announces a net income of $20.8 million for the first half of 2024, driven by gains in commodity futures contracts and increased interest income.

Summary

• United States Brent Oil Fund, LP (BNO) reported a net income of $20.8 million for the six months ended June 30, 2024, compared to a net loss of $19.7 million for the same period in 2023.
• The fund's investment objective is to track the daily changes in percentage terms of the spot price of Brent crude oil.
• BNO primarily invests in futures contracts for crude oil and other petroleum-based fuels.
• As of June 30, 2024, BNO had 4,000,000 shares outstanding and held 1,514 futures contracts for Brent crude oil traded on the ICE Futures Europe.
• The fund's per share NAV increased from $27.39 at the beginning of the year to $32.17 as of June 30, 2024, representing a 17.45% increase.
• The average daily change in the price of the Benchmark Futures Contract for the 30-valuation days ended June 30, 2024, was 0.137%, while the average daily change in the per share NAV of BNO over the same time period was 0.153%.

Sentiment

Score: 7

Explanation: The document presents a positive financial performance for the first half of 2024, with a significant increase in net income and NAV per share. While it acknowledges risks and challenges, the overall tone is optimistic and suggests effective management of the fund.

Positives

• BNO achieved a significant increase in net income, turning a loss in 2023 into a profit in 2024.
• The fund's NAV per share increased substantially, providing a strong return for investors.
• BNO's tracking of its benchmark remained within the target range, demonstrating effective portfolio management.
• Average interest rates earned on short-term investments held by BNO were higher during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Negatives

• The fund is subject to market risks associated with fluctuations in crude oil prices.
• BNO's performance can be impacted by contango and backwardation in the futures market.
• The fund incurs expenses such as management fees and brokerage commissions, which can affect its ability to track its benchmark.
• The fund is exposed to credit risk if counterparties to OTC contracts are unable to meet their obligations.

Risks

• Geopolitical risks, including the Russia-Ukraine war and Middle East conflict, could create supply disruptions and increase volatility in commodity prices.
• Infectious disease outbreaks like COVID-19 could negatively affect BNO and the valuation and performance of BNO's investments.
• Rising interest rates could negatively impact the value of fixed income securities held by BNO.
• BNO may potentially lose money by investing in government money market funds.

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. The fund aims to continue tracking its benchmark effectively.

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 further believes that daily changes in prices of the Benchmark Futures Contract have historically closely tracked the daily changes in spot prices of Brent crude oil.
• USCF believes that the net effect of these relationships will be that the daily changes in the price of BNOs shares on the NYSE Arca on a percentage basis will closely track the daily changes in the spot price of a barrel of Brent crude oil on a percentage basis, plus interest earned on BNOs collateral holdings, less BNOs expenses.

Industry Context

The report provides context on the Brent crude oil market, including price movements, contango and backwardation, and correlations with other energy commodities and investment asset classes. It also discusses the impact of geopolitical events and the COVID-19 pandemic on the oil market.

Comparison to Industry Standards

• The report does not provide specific comparisons to other Brent oil funds or ETFs.
• However, it details BNO's tracking performance against its benchmark, which is a key metric for evaluating the fund's effectiveness.
• The report mentions other related public funds managed by USCF, but does not directly compare their performance to BNO.

Legal Proceedings

• The document discusses several legal proceedings involving USCF and USO, including the Optimum Strategies Action, settlement of SEC and CFTC investigations, In re: United States Oil Fund, LP Securities Litigation, Wang Class Action, Mehan Action, and In re United States Oil Fund, LP Derivative Litigation.
• USCF and USO intend to vigorously contest the claims in In re: United States Oil Fund, LP Securities Litigation and In re United States Oil Fund, LP Derivative Litigation.

Related Party Transactions

• USCF receives a management fee calculated as a percentage of BNO's NAV.
• USCF pays the fees of the Marketing Agent and BNY Mellon for various services.
• BNO pays a portion of the fees and expenses of the independent directors of USCF.

Stakeholder Impact

• The fund's performance directly impacts shareholders through changes in NAV and market price.
• Brokerage commissions and other expenses affect the fund's profitability and returns.
• Legal proceedings could potentially impact the fund's financial position and reputation.

Key Dates

Keywords

Brent crude oil, futures contracts, commodity pool, NAV, USCF, BNO, oil fund, energy, investment