8-K: United States Oil Fund, LP Releases 2023 Annual Financial Statements

United States Oil Fund, LP (USO) has released its annual financial statements for the year ended December 31, 2023, showing a net loss of $46 million and a decrease in net asset value per share.

Summary

• The United States Oil Fund, LP (USO) has released its annual financial statements for the year ended December 31, 2023.
• The fund reported a net loss of $46,043,522 for the year, compared to a net income of $785,240,277 in 2022.
• The net asset value (NAV) per share decreased from $70.05 at the end of 2022 to $66.91 at the end of 2023.
• The fund's total assets decreased from $1,982,960,872 in 2022 to $1,586,712,656 in 2023.
• The fund's investments primarily consist of crude oil futures contracts and cash equivalents.
• The fund transitioned its investment portfolio to primarily invest in Benchmark Oil Futures Contracts, consistent with its strategy prior to the Spring of 2020.
• The fund's general partner, United States Commodity Funds LLC (USCF), is responsible for the management of USO.
• The fund is not subject to federal income taxes; each partner reports their share of income, gain, loss, deductions or credits on their own income tax return.

Sentiment

Score: 3

Explanation: The document reveals a significant net loss and a decrease in NAV per share, indicating a negative financial performance. The ongoing litigation and market risks further contribute to a negative sentiment.

Positives

• The fund has transitioned its investment portfolio to primarily invest in Benchmark Oil Futures Contracts, aligning with its strategy prior to the Spring of 2020.
• The fund has a policy of continuously monitoring its exposure to market and counterparty risk.
• The fund's financial statements were audited by an independent registered public accounting firm, which expressed an unqualified opinion on the financial statements and internal control over financial reporting.

Negatives

• The fund reported a net loss of $46,043,522 for the year ended December 31, 2023.
• The net asset value per share decreased from $70.05 to $66.91 during 2023.
• Total assets decreased from $1,982,960,872 to $1,586,712,656 year-over-year.
• The fund is exposed to market risk and credit risk associated with its investments in futures contracts and swaps.
• The fund is subject to the risk of financial failure by its clearing broker or custodian.
• The fund is involved in ongoing litigation related to disclosures and actions taken during the market volatility in 2020.

Risks

• The fund is exposed to market risk, which is the risk arising from changes in the market value of the contracts.
• The fund is exposed to credit risk, which is the risk of failure by another party to perform according to the terms of a contract.
• The fund's investments in futures contracts and swaps are subject to market volatility and may result in losses.
• The fund is subject to the risk of financial failure by its clearing broker or custodian.
• The fund is involved in ongoing litigation, which could result in significant costs and liabilities.
• The fund's ability to meet its investment objective may be impacted by market conditions, regulatory requirements, and risk mitigation measures.

Future Outlook

The document does not provide specific forward-looking statements or guidance, but it does mention that USO will continue to have the ability to invest in Oil Futures Contracts beyond the Benchmark Oil Futures Contract and Other Oil-Related Investments if market conditions, regulatory requirements, risk mitigation measures, liquidity requirements, or other factors require it to do so.

Management Comments

• USCF believes that it is not practical to manage the portfolio to achieve the investment objective when investing in Oil Futures Contracts and Other Oil-Related Investments.
• USCF is responsible for the management of USO.
• USCF is a member of the National Futures Association (the NFA) and became registered as a commodity pool operator with the Commodity Futures Trading Commission (the CFTC).

Industry Context

This announcement is relevant to the broader commodity ETF industry, particularly those funds focused on crude oil. The fund's performance is influenced by market conditions, regulatory requirements, and risk mitigation measures, which are common factors affecting commodity ETFs. The transition of the fund's investment portfolio to primarily invest in Benchmark Oil Futures Contracts is a notable development in the context of the fund's investment strategy.

Comparison to Industry Standards

• The United States Oil Fund (USO) is a unique product, designed to track the daily changes in the price of light, sweet crude oil, making direct comparisons to other ETFs challenging.
• Unlike broad market ETFs such as SPY or IVV, USO's performance is heavily influenced by the futures market and the effects of contango and backwardation.
• Compared to other commodity ETFs like the Invesco DB Commodity Index Tracking Fund (DBC), USO is more narrowly focused on crude oil, while DBC tracks a broader basket of commodities.
• The fund's management fee of 0.45% is within the range of other commodity-focused ETFs, but the total expense ratio may vary due to other operating costs.
• The fund's performance is also impacted by the costs of rolling futures contracts, which can lead to tracking error compared to the spot price of oil, a common issue for commodity futures ETFs.
• The fund's legal issues are not typical for most ETFs, but are a result of the unique market conditions in 2020 and the fund's specific investment strategy.

Legal Proceedings

• USO is involved in ongoing litigation related to disclosures and actions taken during the market volatility in 2020.
• The fund is contesting claims in the In re: United States Oil Fund, LP Securities Litigation and In re United States Oil Fund, LP Derivative Litigation.
• The Optimum Strategies Action was dismissed with prejudice.

Related Party Transactions

• USCF, the general partner of USO, receives a management fee equal to 0.45% per annum of average daily total net assets.
• USO shares fees and expenses with other related public funds managed by USCF on a pro rata basis.
• USCF pays the fees of the Marketing Agent and BNY Mellon for their services.

Stakeholder Impact

• Shareholders have experienced a decrease in the net asset value per share.
• Shareholders are exposed to market and credit risks associated with the fund's investments.
• Shareholders are subject to the outcome of ongoing litigation.
• Employees of USCF and related service providers are impacted by the fund's performance and operational requirements.
• Customers of the fund, primarily Authorized Participants, are impacted by the fund's NAV and trading activity.
• Suppliers and creditors of the fund are impacted by the fund's financial performance and ability to meet its obligations.

Next Steps

• The fund will continue to monitor its exposure to market and counterparty risk.
• The fund will continue to transition its investment portfolio to primarily invest in Benchmark Oil Futures Contracts.
• The fund will continue to defend itself in ongoing litigation.

Key Dates

Keywords

United States Oil Fund, USO, Crude Oil, Futures Contracts, Financial Statements, Commodity Pool, Net Asset Value, Derivatives, Swaps, Investment Fund