10-Q: USO Q3 2025: NAV Declines Amid Crude Oil Market Volatility

United States Oil Fund, LP reports a decrease in Net Asset Value and net loss for the nine months ended September 30, 2025, despite outperforming its benchmark.

Summary

• Net Asset Value (NAV) per share decreased to $73.58 at September 30, 2025, from $75.45 at December 31, 2024.
• Total Partners Capital decreased to $884,669,387 at September 30, 2025, from $1,088,223,487 at December 31, 2024.
• A net loss of $9,194,977 was reported for the nine months ended September 30, 2025, a significant decline from a net income of $124,773,066 for the same period in 2024.
• Net income for the three months ended September 30, 2025, was $23,463,970, a substantial improvement from a net loss of $135,450,397 for the same period in 2024.
• The fund's actual total return for the nine months ended September 30, 2025, was (2.48)%, outperforming its benchmark's estimated total return of (5.44)% by 2.96%.
• The Benchmark Oil Futures Contract price decreased by approximately (13.04)% from $71.72 per barrel at the start of the period to $62.37 per barrel at September 30, 2025.
• Average daily total net assets decreased to $995,903,360 for the nine months ended September 30, 2025, from $1,338,957,900 for the same period in 2024.
• Dividend and interest income earned on Treasuries, cash, and cash equivalents decreased to $29,843,893 for the nine months ended September 30, 2025, from $48,992,199 for the same period in 2024.
• Total commissions accrued to brokers increased to $1,133,961 for the nine months ended September 30, 2025, from $1,110,080 for the same period in 2024, primarily due to a higher number of Oil Futures Contracts held and traded.
• USO held 11,962 NYMEX WTI Crude Oil Futures CL contracts as of September 30, 2025.
• The crude oil futures market experienced states of mild contango during the nine months ended September 30, 2025.

Sentiment

Score: 6

Explanation: While the fund experienced a net loss and a decline in NAV for the nine-month period, it successfully outperformed its benchmark. The positive net income for the most recent quarter and the dismissal of a significant lawsuit are favorable. However, the overall decline in crude oil prices and the presence of contango present ongoing challenges.

Positives

• Outperformed its benchmark: The actual total return of (2.48)% for the nine months ended September 30, 2025, was better than the benchmark's estimated (5.44)%.
• Net income for the three months ended September 30, 2025, was positive ($23,463,970) compared to a significant loss in the prior year period.
• Successfully transitioned its investment portfolio to primarily invest in the Benchmark Oil Futures Contract, consistent with its pre-2020 strategy.
• No action was taken by NYMEX despite exceeding accountability levels (held a maximum of 16,232 Crude Oil Futures CL contracts against a 10,000 limit).
• The Optimum Strategies Action lawsuit, filed against USO and USCF, was dismissed with prejudice on March 15, 2023.

Negatives

• Overall net loss of $9,194,977 for the nine months ended September 30, 2025, compared to a net income of $124,773,066 in the prior year period.
• Decrease in Net Asset Value (NAV) per share from $75.45 at December 31, 2024, to $73.58 at September 30, 2025.
• Total Partners Capital decreased by approximately $203.5 million over the nine-month period.
• The Benchmark Oil Futures Contract price decreased by approximately (13.04)% over the nine-month period.
• Dividend and interest income decreased significantly for both the three and nine months ended September 30, 2025, compared to the prior year periods.
• The crude oil futures market experienced states of mild contango, which can negatively impact returns for a fund rolling futures contracts.

Risks

• Market risk arises from changes in the market value of contracts, with potential for unlimited liability on contracts sold short.
• Commodity price risk exposes USO to crude oil price fluctuations through its holdings of Oil Futures Contracts and other derivatives.
• Credit risk exists due to the possibility of counterparty failure to perform obligations, particularly with OTC swaps, and the risk of financial failure by clearing brokers or custodians.
• Contango and backwardation are natural market forces that can impact total return relative to a direct investment in crude oil; contango (when the near-month price is lower than the next-month) can lead to underperformance.
• Investments in Oil Interests may be subject to periods of illiquidity due to market conditions, regulatory considerations, or daily price limits on exchanges.
• Evolving regulatory requirements in commodity interest trading (e.g., position limits, margin rules for swaps) could negatively impact USO's ability to meet its investment objective or increase tracking error.
• Geopolitical conflicts (e.g., Russia-Ukraine war, Middle East conflicts), natural disasters, public health disruptions (e.g., COVID-19), sanctions, tariffs, and trade wars can cause volatility in commodity prices and impact investment value, pricing, and liquidity.
• Interest rate risk means fixed income securities and other investments may fluctuate in value due to interest rate changes; rising rates can lead to losses on existing investments, while falling rates can reduce reinvestment income.
• Inflation risk, a general increase in the overall price level of goods and services, can erode the value of cash and Treasury investments.
• Money market fund risk indicates there is no guarantee that government money market funds will preserve value at $1.00 per share, and USO may lose money by investing in them.
• Tracking error can occur if USO buys or sells holdings at prices other than the settlement price, due to the impact of expenses, or if Other Oil-Related Investments fail to closely track the benchmark.
• OTC contract risk involves less certainty in valuing OTC derivatives, and highly customized transactions may increase liquidity risk, potentially suspending redemptions.
• EFRP transactions may expose USO to counterparty risk during the interim period between the execution of the OTC component and the exchange for a corresponding futures contract.
• Changes in U.S. federal income tax laws are uncertain and could have a negative effect on USO or its investors.

Future Outlook

USCF anticipates that interest rates may continue to stagnate over the near future, and fees and expenses paid by USO may continue to be lower than interest earned, potentially leading to outperformance of its benchmark. The long-expected reduction of OPEC+ quotas and voluntary cuts is underway, which has likely moved the 'OPEC put' (price floor) lower. Geopolitical tensions, such as the Israel-US attack on Iran's nuclear facilities and potential Strait of Hormuz closure, remain a flash point for crude oil supply risk, potentially raising prices, while resolutions could lower them. The overall impact of the Trump administration's proposed tariffs may increase the risk of a global economic slowdown or recession, reducing crude oil demand.

Management Comments

• USCF believes that it is not practical to manage the portfolio to achieve the foregoing investment objective when investing in Oil Futures Contracts and Other Oil-Related Investments (referring to matching the spot price in dollar terms).
• USCF believes that market arbitrage opportunities will cause daily changes in USOs share price on the NYSE Arca on a percentage basis to closely track daily changes in USOs per share NAV.
• USCF believes that the net effect of these relationships will be that the daily changes in the price of USOs 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 USOs collateral holdings, less USOs expenses.
• USCF anticipates that interest rates may continue to stagnate over the near future. It is anticipated that fees and expenses paid by USO may continue to be lower than interest earned by USO. As such, USCF anticipates that USO could possibly outperform its benchmark so long as interest earned is greater than the fees and expenses paid by USO.
• USCF believes that crude oil has historically not demonstrated a strong correlation with equities or bonds over long periods of time. However, USCF also believes that in the future it is possible that crude oil could have long term correlation results that indicate prices of crude oil more closely track the movements of equities or bonds.

Industry Context

The crude oil market experienced significant volatility in the early 2020s due to the COVID-19 pandemic, related supply chain disruptions, and the Saudi-Russia price war, leading to negative WTI prices and extreme contango. While conditions have stabilized, geopolitical conflicts (Russia-Ukraine, Middle East) and potential trade wars (Trump administration tariffs) continue to introduce supply and demand uncertainty. OPEC+ has begun unwinding voluntary production cuts, which could impact global supply dynamics and price floors. U.S. crude oil production has risen significantly, making the U.S. the world's largest producer, though future growth may be constrained by drillers' restraint rather than political policy.

Comparison to Industry Standards

• The fund's tracking goal is for the average daily percentage change in NAV over 30 successive valuation days to be within a range of 90% to 110% of the average daily change in the Benchmark Oil Futures Contract. USO met this goal for the 30-valuation days ended September 30, 2025, with an average daily difference of 0.012% (0.027% NAV change vs. 0.015% benchmark change).
• USO's actual total return for the nine months ended September 30, 2025, was (2.48)%, outperforming the estimated benchmark return of (5.44)% by 2.96%. This compares favorably to the nine months ended September 30, 2024, where USO's actual total return was 4.41%, outperforming the benchmark's 1.35% by 3.06%.
• The filing provides correlation matrices comparing monthly movements of crude oil prices versus other energy commodities (natural gas, diesel-heating oil, unleaded gasoline) and major non-commodity investment asset classes (Large Cap US Equities (S&P 500), US Govt Bonds (BEUSG4 Index), Global Equities (FTSE World Index)) over 1-year and 10-year periods. Historically, crude oil has not demonstrated a strong long-term correlation with equities or bonds.

Legal Proceedings

• The Optimum Strategies Action, filed against USO and USCF, was dismissed with prejudice on March 15, 2023.
• USCF and USO announced a resolution with the SEC and CFTC on November 8, 2021, resulting in cease-and-desist orders and civil monetary penalties totaling $2,500,000 paid by USCF.
• In re: United States Oil Fund, LP Securities Litigation (Lucas Class Action): The Court granted the defendants' motion to dismiss the class action complaint in its entirety without prejudice on September 29, 2025, granting the plaintiff leave to move to amend the complaint by November 26, 2025. USCF, USO, and individual defendants intend to vigorously contest any such claims.
• The Wang Class Action was voluntarily dismissed on August 4, 2020.
• The Mehan Action is stayed pending final disposition of the motion(s) to dismiss in In re: United States Oil Fund, LP Securities Litigation. USCF, USO, and other defendants intend to vigorously contest such claims.
• In re United States Oil Fund, LP Derivative Litigation (Cantrell and AML Actions) is consolidated and stayed pending final disposition of the motion(s) to dismiss in In re: United States Oil Fund, LP Securities Litigation. USCF, USO, and other defendants intend to vigorously contest the claims.

Related Party Transactions

• USCF, as the general partner, receives a monthly management fee equal to 0.45% per annum of USO's average daily total net assets.
• USCF pays the fees of the Marketing Agent (ALPS Distributors, Inc.) and BNY Mellon for administrative, custody, and transfer agency services.
• USO and certain Related Public Funds pay a licensing fee to NYMEX equal to 0.015% on all net assets.
• USO shares directors' fees and insurance expenses on a pro rata basis with each Related Public Fund based on relative assets.

Stakeholder Impact

• Shareholders experienced a decrease in NAV per share and an overall net loss for the nine-month period, but the fund outperformed its benchmark. They remain subject to market volatility, contango/backwardation, and geopolitical risks.
• Authorized Participants continue to facilitate the creation and redemption of shares, paying a $1,000 transaction fee per order.
• USCF (General Partner) continues to earn management fees based on average daily total net assets and is responsible for managing the fund and paying certain third-party fees.
• FCMs and counterparties receive brokerage commissions and are exposed to credit risk from USO, while USO also bears credit risk to them.
• Regulatory bodies (SEC, CFTC) previously settled investigations with USCF and USO, imposing cease-and-desist orders and penalties, and continue to monitor compliance.
• Plaintiffs in ongoing class action and derivative lawsuits face continued litigation, with some dismissals and pending motions.

Next Steps

• The plaintiff in In re: United States Oil Fund, LP Securities Litigation has until November 26, 2025, to move to amend the complaint.
• USCF, USO, and individual defendants intend to continue vigorously contesting any claims in the Lucas Class Action and In re United States Oil Fund, LP Derivative Litigation.
• USO will continue to monitor its exposure to market and counterparty risk through financial, position, and credit exposure reporting controls and procedures.
• USO will continue to publish monthly account statements for its shareholders, furnished to the SEC on Form 8-K and posted on its website.

Key Dates

Recommendation

While the United States Oil Fund (USO) experienced a net loss and a decline in Net Asset Value for the nine months ended September 30, 2025, it notably outperformed its benchmark. The positive net income in the most recent quarter and the dismissal of a key lawsuit are encouraging. However, the persistent volatility in crude oil prices, the impact of contango, and ongoing geopolitical risks present significant headwinds. The fund's ability to track its benchmark effectively, despite these challenges, suggests competent management within a difficult market. Given the mixed financial results and the inherent volatility of the underlying commodity, a 'hold' recommendation is appropriate for investors already exposed to crude oil, acknowledging both the fund's relative outperformance and the continued market uncertainties. New investors should approach with caution, understanding the specific risks associated with commodity ETFs.

Keywords

Crude oil, futures, commodity, ETF, USO, WTI, NYMEX, contango, backwardation, energy, investment, SEC filing, 10-Q, financial report, market risk, liquidity, derivatives, swaps, geopolitical risk, inflation