10-Q: United States Gasoline Fund (UGA) Reports Positive Net Income for Q2 2024, NAV Increases

United States Gasoline Fund, LP (UGA) reports an increase in net asset value (NAV) and net income for the quarter ended June 30, 2024, driven by gasoline futures market movements and higher interest income.

Summary

• United States Gasoline Fund, LP (UGA) is a commodity pool that issues shares traded on the NYSE Arca, aiming to reflect the daily changes in the spot price of gasoline.
• For the six months ended June 30, 2024, UGA reported a net income of $12,157,902, compared to $3,670,971 for the same period in 2023.
• The net asset value (NAV) per share increased from $60.64 on December 31, 2023, to $67.49 on June 30, 2024.
• The fund held 996 NYMEX gasoline futures contracts as of June 30, 2024.
• The average daily change in UGA's NAV for the 30-valuation days ended June 30, 2024, was 0.067%, compared to 0.051% for the Benchmark Futures Contract, remaining within the target tracking range.
• The fund's investment objective is to have daily changes in its NAV closely track the daily changes in the price of the Benchmark Futures Contract.
• The fund invests primarily in gasoline futures contracts and, to a lesser extent, in other gasoline-related investments.
• The fund's expenses include management fees, brokerage commissions, and other operating costs.
• The fund is exposed to market risk, particularly commodity price risk, and credit risk related to counterparties.
• The fund's performance is affected by factors such as contango and backwardation in the gasoline futures market.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook, with increased net income and NAV. However, it also acknowledges various risks and uncertainties associated with the gasoline market and regulatory environment, preventing a higher score.

Positives

• UGA's net income increased significantly compared to the same period last year.
• The fund's NAV per share showed a positive increase.
• UGA's NAV tracking of the Benchmark Futures Contract remained within the targeted range.
• The fund's total return outperformed its benchmark.
• Higher interest rates on short-term investments contributed to increased income.
• The fund has an unlimited number of shares that can be issued in the form of Creation Baskets.

Negatives

• The fund is subject to market risk, particularly commodity price risk, which can lead to fluctuations in share value.
• The fund's performance is affected by contango and backwardation, which can impact total returns relative to spot gasoline prices.
• The fund is exposed to credit risk related to counterparties in OTC contracts.
• The fund's expenses, including management fees and brokerage commissions, can impact its ability to track the Benchmark Futures Contract.

Risks

• Market volatility in the unleaded gasoline and futures markets, influenced by factors like the COVID-19 pandemic, the Russia-Ukraine war, and conflicts in the Middle East, can affect the fund's value.
• Regulatory changes, such as position limits and margin requirements for swaps, could impact the fund's investment strategy.
• Infectious disease outbreaks, like COVID-19, could negatively affect UGA and the valuation and performance of UGAs investments.
• Rising interest rates could negatively impact the value of fixed income securities held by the fund.
• The fund may potentially lose money by investing in government money market funds.
• Geopolitical risk remains particularly high in 2024, with the Russia-Ukraine war and Middle East conflict potentially creating further supply disruptions and sanctions.

Future Outlook

The report contains forward-looking statements regarding management's plans and objectives for future operations, which are subject to various risks and uncertainties, including changes in inflation, market volatility, and geopolitical events.

Management Comments

• USCF believes that market arbitrage opportunities will cause daily changes in UGAs share price on the NYSE Arca on a percentage basis to closely track daily changes in UGAs 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 gasoline.
• USCF believes that the net effect of these relationships will be that the daily changes in the price of UGAs shares on the NYSE Arca on a percentage basis will closely track, the daily changes in the spot price of gasoline on a percentage basis, plus interest earned on UGAs collateral holdings, less UGAs expenses.

Industry Context

The fund's performance is closely tied to the gasoline market, which is influenced by factors such as crude oil prices, refining capacity, and consumer demand. Geopolitical events and economic conditions also play a significant role in the gasoline market.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• However, the fund's objective is to track the daily changes in the spot price of gasoline, which is a common strategy for commodity-based ETFs.
• Comparable companies include other gasoline or energy-focused ETFs, such as the Invesco DB Oil Fund (DBO) or the United States Oil Fund (USO), although USO focuses on crude oil rather than gasoline.
• The fund's tracking error and expense ratio are important metrics to compare against these peers to assess its efficiency and cost-effectiveness.

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 intends 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 UGA's NAV.
• USCF pays the fees of the Marketing Agent and BNY Mellon for their services.
• UGA and the Related Public Funds pay a licensing fee to the NYMEX.

Stakeholder Impact

• Shareholders benefit from the increased NAV and net income.
• Authorized Participants are involved in the creation and redemption of shares.
• The fund's performance impacts investors seeking exposure to the gasoline market.

Next Steps

• The fund will continue to manage its portfolio to track the Benchmark Futures Contract.
• USCF will continue to monitor market conditions, regulatory requirements, and risk mitigation measures.
• The fund will continue to issue and redeem shares in Creation and Redemption Baskets.

Key Dates

Keywords

gasoline, futures contracts, United States Gasoline Fund, USCF, NAV, RBOB, commodity pool, NYMEX, contango, backwardation