8-K: USO Reports 2025 Net Loss, NAV Declines Amid Market Volatility

United States Oil Fund, LP (USO) filed its annual financial statements for the year ended December 31, 2025, reporting a net loss and a decrease in net asset value per share.

Summary

• Reported a net loss of $64,657,517 for the year ended December 31, 2025, a significant decline from a net income of $221,118,191 in 2024.
• Net asset value (NAV) per share decreased to $69.10 as of December 31, 2025, from $75.45 at the end of 2024.
• Total Partners Capital declined to $886,076,412 in 2025 from $1,088,223,487 in 2024.
• Experienced a total return of (8.42)% for the year ended December 31, 2025, compared to a 12.76% total return in 2024.
• Maintained effective internal control over financial reporting as of December 31, 2025, with no critical audit matters identified.
• Transaction fees for Authorized Participants to create or redeem baskets were reduced from $1,000 to $350 per order, effective January 1, 2026.
• Ongoing legal proceedings, including the In re: United States Oil Fund, LP Securities Litigation, continue to be contested, though one related action (Optimum Strategies Action) was dismissed with prejudice.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a moderately negative report due to the significant net loss and decline in NAV and total partners' capital for 2025. While internal controls are effective and one lawsuit was dismissed, the overall financial performance for the year was poor, and several other legal challenges remain pending.

Positives

• Independent auditors issued an unqualified opinion on the financial statements and confirmed effective internal control over financial reporting as of December 31, 2025.
• No critical audit matters were identified by the independent auditors.
• Transaction fees for Authorized Participants were reduced from $1,000 to $350 per order, effective January 1, 2026, potentially lowering costs for large-scale share transactions.
• The Optimum Strategies Action, a class action lawsuit, was dismissed with prejudice by the court on March 15, 2023, resolving one legal challenge.

Negatives

• Reported a net loss of $64,657,517 for the year ended December 31, 2025, a substantial reversal from the $221,118,191 net income in 2024.
• Net asset value (NAV) per share decreased by $6.35, from $75.45 at December 31, 2024, to $69.10 at December 31, 2025.
• Total Partners Capital decreased by $202,147,075, from $1,088,223,487 in 2024 to $886,076,412 in 2025.
• Experienced a negative total return of (8.42)% for the year ended December 31, 2025.
• Realized loss on closed commodity futures contracts was $(41,170,050) in 2025, compared to a gain of $121,123,950 in 2024.
• Realized loss on swap contracts was $(18,416,818) in 2025, compared to a gain of $22,162,096 in 2024.
• Change in unrealized gain (loss) on open commodity futures contracts was $(36,341,710) in 2025, compared to a gain of $25,379,090 in 2024.
• Ongoing legal proceedings, including the In re: United States Oil Fund, LP Securities Litigation and derivative actions, continue to pose potential liabilities and require defense.
• Settled SEC and CFTC investigations in November 2021, resulting in civil monetary penalties totaling $2,500,000 for violations related to disclosures during the 2020 market volatility.

Risks

• Market Risk: Exposure to changes in the market value of futures contracts, options, and swaps, which can lead to losses.
• Credit Risk: Risk of failure by counterparties (e.g., swap counterparties, clearinghouses, FCMs) to perform their contractual obligations, potentially leading to loss of assets.
• Illiquid Markets: Possibility of an illiquid market for futures contracts, making it difficult to enter or exit positions at favorable prices.
• Valuation Uncertainty for OTC Derivatives: Valuing over-the-counter (OTC) derivatives is less certain than exchange-traded instruments due to individually negotiated terms and lack of contractual obligation for market makers to quote prices.
• Market Volatility: Global events such as pandemics (COVID-19), wars (Russia-Ukraine), disputes among oil-producing countries, and trade barriers can cause significant volatility in oil prices, affecting investment value, pricing, and liquidity.
• Contango and Backwardation: Natural market forces that can impact the total return on an investment in USO's shares relative to a hypothetical direct investment in crude oil, potentially causing deviations from the spot price.
• FCM Insolvency: In the event of an FCM's insolvency, recovery of commingled customer funds may be limited to a pro rata share, potentially resulting in less than the total amount deposited.
• Custodian Failure: The failure or insolvency of USO's custodian could result in a substantial loss of assets.
• Money Market Fund Risk: Exposure to any risk of loss associated with investments in money market funds.
• Legal Proceedings: Ongoing class action and derivative lawsuits could result in significant compensatory damages, restitution, and legal fees.

Future Outlook

The fund will continue to pursue its investment objective of reflecting daily changes in the spot price of light, sweet crude oil, primarily by investing in the Benchmark Oil Futures Contract. It retains the flexibility to invest in other Oil Futures Contracts and Other Oil-Related Investments, such as OTC swaps, and to hold significant portions of its portfolio in cash, based on market conditions, regulatory requirements, or risk mitigation measures. Transaction fees for Authorized Participants were reduced effective January 1, 2026.

Management Comments

• "To the best of his knowledge and belief, the information contained in this Annual Report for the years ended December 31, 2025, 2024 and 2023 is accurate and complete." John P. Love, President & Chief Executive Officer of United States Commodity Funds LLC.

Industry Context

StockSavvy.ai notes that USO operates within the highly volatile commodity ETF sector, specifically tracking crude oil prices. The fund's performance is directly tied to global oil market dynamics, which have been significantly impacted by geopolitical events (e.g., Russia-Ukraine war) and supply-demand imbalances, as highlighted by the 2020 market volatility. The fund's strategy of investing primarily in the near-month futures contract exposes it to contango and backwardation, a common characteristic of commodity futures markets that can cause its returns to diverge from spot prices. The ongoing legal challenges reflect the heightened scrutiny and risks associated with managing commodity-linked investment products during periods of extreme market stress.

Comparison to Industry Standards

• The filing does not provide direct comparisons to specific comparable companies or projects.
• USO's investment objective is to reflect the daily changes in percentage terms of the spot price of light, sweet crude oil, as measured by the daily changes in the price of the Benchmark Oil Futures Contract. This is a standard objective for a passively managed, single-commodity ETF.
• The fund's exposure to contango and backwardation is a common characteristic of commodity futures-based ETFs, distinguishing their performance from direct physical commodity holdings or equity investments in oil producers.
• The management fee of 0.45% per annum of average daily total net assets is within the typical range for actively managed commodity pools or ETFs, though some passive index funds may have lower fees.

Legal Proceedings

• In re: United States Oil Fund, LP Securities Litigation: A consolidated putative class action pending in the U.S. District Court for the Southern District of New York (Civil Action No. 1:20-cv-04740). Claims under the 1933 Act, the Exchange Act, and Rule 10b-5, challenging statements from February 25, 2020, to April 28, 2020, regarding extraordinary market conditions and oil demand. The court granted a motion to dismiss without prejudice on September 29, 2025, and a motion to amend the complaint is pending as of November 26, 2025.
• Mehan Action: A derivative action filed on behalf of USO in the Superior Court of California (Case No. RG20070732), alleging breach of fiduciary duties and failure to act in good faith related to a March 19, 2020, registration statement and disclosures during the 2020 oil market volatility. All proceedings are stayed pending disposition of motions to dismiss in the In re: United States Oil Fund, LP Securities Litigation.
• In re United States Oil Fund, LP Derivative Litigation: Consolidated derivative actions (Cantrell and AML Actions) filed on behalf of USO in the U.S. District Court for the Southern District of New York (Civil Action No. 1:20-cv-06974). Allegations include violations of the Exchange Act and common law claims (breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets) stemming from 2020 market conditions. All proceedings are stayed pending final disposition of motions to dismiss in the In re: United States Oil Fund, LP Securities Litigation.
• Settlement of SEC and CFTC Investigations: On November 8, 2021, USCF and USO settled investigations with the SEC and CFTC, resulting in cease-and-desist orders and civil monetary penalties totaling $2,500,000 for violations related to disclosures during the April-June 2020 period.

Related Party Transactions

• USCF Management Fee: USO pays USCF, its general partner, a monthly fee equal to 0.45% per annum of average daily total net assets for investment management and administrative services.
• Independent Directors and Officers Expenses: USO pays its pro rata share of directors and officers liability insurance and fees/expenses for independent directors, shared with Related Public Funds based on relative assets. For 2025, USO's share was $338,042.
• NYMEX Licensing Fees: USO and certain Related Public Funds pay NYMEX a licensing fee equal to 0.015% on all net assets for the use of settlement prices and service marks. USO incurred $146,967 in 2025.
• Brokerage and Futures Commission Merchant Agreements: USO has agreements with RBC Capital Markets LLC, Marex North America, LLC, Marex Capital Markets, Inc., Macquarie Futures USA LLC, and ADM Investor Services, Inc. as FCMs, paying commissions of approximately $7 to $8 per round-turn trade.
• Swap Dealer Agreements: USO has ISDA Master Agreements with Macquarie Bank Limited, Société Générale, and The Bank of Nova Scotia to serve as OTC swap counterparties, paying a flat fee between 0.20% and 0.30% on the daily notional value of each OTC swap transaction.

Stakeholder Impact

• Shareholders: Directly impacted by the negative total return and decrease in NAV per share in 2025. Also exposed to the risks and potential outcomes of ongoing legal proceedings.
• Authorized Participants: Benefit from the reduced transaction fees for creating and redeeming baskets, effective January 1, 2026.
• USCF (General Partner): Receives management fees from USO but also bears the costs of legal defense for ongoing lawsuits and previously paid civil monetary penalties.
• FCMs and Swap Counterparties: Continue to provide services and receive commissions/fees, subject to the terms of their agreements with USO.
• Regulatory Authorities (SEC, CFTC): Previously imposed penalties and cease-and-desist orders, indicating ongoing oversight of USO's compliance.

Next Steps

• Continued defense against ongoing legal proceedings, including the motion for leave to file a proposed second consolidated amended complaint in the In re: United States Oil Fund, LP Securities Litigation.
• Monitoring of market conditions, regulatory requirements, and risk mitigation measures to guide investment decisions in Oil Futures Contracts and Other Oil-Related Investments.
• Ongoing management of the fund's portfolio in accordance with its investment objective and the reduced Authorized Participant transaction fees effective January 1, 2026.

Key Dates

Recommendation

The fund experienced a significant net loss and decline in NAV in 2025, reflecting challenging market conditions for crude oil. While the fund's internal controls are effective and one lawsuit was dismissed, several other legal proceedings remain pending, creating uncertainty. The reduction in transaction fees for Authorized Participants is a minor positive. Given the volatility inherent in crude oil investments and the current financial performance, a "hold" recommendation is appropriate for existing investors to monitor the resolution of legal issues and future market trends, while new investors should exercise caution due to the recent underperformance and ongoing litigation.

Keywords

Crude Oil ETF, USO, Oil Futures, Commodity Pool, Financial Statements, SEC Filing, Energy Market, Investment Fund, Commodity Trading, Exchange Traded Fund, WTI Crude Oil, Derivatives, Market Risk, Credit Risk, Legal Proceedings