Disclosure
Description of United States Oil Fund, LP and the General Risks of the Offering
An investment in the units issued by United States Oil Fund, LP ("USO") involves risks. These risks can significantly impact the market value of the units. Some of the risks you may face are summarized below.
- Unlike mutual funds, commodity pools or other investment pools that actively manage their investments in an attempt to realize income and gains from their investing activities and distribute such income and gains to their investors, USOF generally does not expect to distribute cash to limited partners..
- There is a risk that USOF will not earn trading gains sufficient to compensate for the fees and expenses that it must pay and as such USOF may not earn any profit. USOF pays brokerage charges based on futures commission merchant fees, management fees on its average net assets, and over-the-counter spreads and extraordinary expenses..
- An investment in USOF involves the risk that the changes in the price of USOF's units will not accurately track the changes in the Benchmark Oil Futures Contract.
- Investing in oil interests subjects USOF to the risks of the crude oil industry and this could result in large fluctuations in the price of USOF's units.
- USOF's exposure to market risk depends on a number of factors, including the markets for oil, the volatility of interest rates and foreign exchange rates, the liquidity of the Oil Futures Contracts and Other Oil Interests markets and the relationships among the contracts held by USOF. Drastic market occurrences could ultimately lead to the loss of all or substantially all of an investor's capital.
- USOF engages in the trading of futures contracts, options on futures contracts and cleared swaps (collectively, "derivatives"). USOF is exposed to both market risk, which is the risk arising from changes in the market value of the contracts, and credit risk, which is the risk of failure by another party to perform according to the terms of a contract.
- Futures contracts and cleared swaps involve, to varying degrees, elements of market risk (specifically commodity price risk) and exposure to loss in excess of the amount of variation margin. The face or contract amounts reflect the extent of the total exposure USOF has in the particular classes of instruments.
- Additional risks associated with the use of futures contracts are an imperfect correlation between movements in the price of the futures contracts and the market value of the underlying securities and the possibility of an illiquid market for a futures contract.
- If USOF were to enter into non-exchange traded contracts or over-the-counter transactions, it would be subject to the credit risk associated with counterparty non-performance. The credit risk from counterparty non-performance associated with such instruments is the net unrealized gain, if any, on the transaction. USOF has credit risk under its futures contracts since the sole counterparty to all domestic and foreign futures contracts is the clearinghouse for the exchange on which the relevant contracts are traded. In addition, USOF bears the risk of financial failure by the clearing broker.
- Proposed regulation by the CFTC and SEC as promulgated under the Dodd-Frank Act would change operational requirements by USOF, increasing cost and changing operational procedures which could negatively impact USOF.
- Currently, USOF's cash and other property, such as U.S. Treasuries, deposited with a futures commission merchant are considered commingled with all other customer funds, subject to the futures commission merchant's segregation requirements. In the event of a futures commission merchant's insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than the total of cash and other property deposited. The insolvency of a futures commission merchant could result in the complete loss of USOF's assets posted with that futures commission merchant; however, the vast majority of USOF's assets are held in U.S. Treasuries, cash and/or cash equivalents with USOF's custodian and would not be impacted by the insolvency of a futures commission merchant. Also, the failure or insolvency of USOF's custodian could result in a substantial loss of USOF's assets.
- USCF invests a portion of USOF's cash in money market funds that seek to maintain a stable net asset value. USOF is exposed to any risk of loss associated with an investment in these money market funds.
- Currently, when USOF enters into Oil Futures Contracts and Other Oil Interests, it is exposed to the credit risk that the counterparty will not be able to meet its obligations. The counterparty for the Oil Futures Contracts traded on the NYMEX and on most other futures exchanges is the clearinghouse associated with the particular exchange. In general, in addition to margin required to be posted by the clearinghouse in connection with cleared trades, clearinghouses are backed by their members who may be required to share in the financial burden resulting from the nonperformance of one of their members and, therefore, this additional member support should significantly reduce credit risk. Some foreign exchanges are not backed by their clearinghouse members but may be backed by a consortium of banks or other financial institutions. There can be no assurance that any counterparty, clearinghouse, or their members or their financial backers will satisfy their obligations to USOF in such circumstances.
- USCF invests primarily in Oil Futures Contracts, a significant portion of which are traded on United States exchanges, including the NYMEX. However, a portion of USOF's trades may take place on markets and exchanges outside the United States. Some non-U.S. markets present risks because they are not subject to the same degree of regulation as their U.S. counterparts.
- The success of USOF depends on the ability of USCF to accurately implement trading systems, and any failure to do so could subject USOF to losses on such transactions.
- Regulation of the commodity interests and energy markets is extensive and constantly changing; future regulatory developments are impossible to predict but may significantly and adversely affect USOF
*Some risks listed above may be mitigated due to rules proposed by the CFTC and SEC as promulgated under the Dodd-Frank Act. For a discussion of these risks and others, please see the current Prospectus .