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FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2022

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 7 — FAIR VALUE OF FINANCIAL INSTRUMENTS

USO values its investments in accordance with Accounting Standards Codification 820 – Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurement. The changes to past practice resulting from the application of ASC 820 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurement. ASC 820 establishes a fair value hierarchy that distinguishes between: (1) market participant assumptions developed based on market data obtained from sources independent of USO (observable inputs) and (2) USO’s own assumptions about market participant assumptions developed based on the best information available under the circumstances (unobservable inputs). The three levels defined by the ASC 820 hierarchy are as follows:

Level I – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level II – Inputs other than quoted prices included within Level I that are observable for the asset or liability, either directly or indirectly.

Level II assets include the following: quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).

Level III – Unobservable pricing input at the measurement date for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available.

In some instances, the inputs used to measure fair value might fall within different levels of the fair value hierarchy. The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest input level that is significant to the fair value measurement in its entirety.

The following table summarizes the valuation of USO’s securities at March 31, 2022 using the fair value hierarchy:


At March 31, 2022		Total			Level I			Level II			Level III
Short-Term Investments		$	2,274,000,000		$	2,274,000,000		$	—		$	—
Exchange-Traded Futures Contracts
United States Contracts			269,339,826			269,339,826			—			—
OTC Commodity Swap Contracts			(1,287)			—			(1,287)			—

The following table summarizes the valuation of USO’s securities at December 31, 2021 using the fair value hierarchy:


At December 31, 2021		Total			Level I			Level II			Level III
Short-Term Investments		$	1,544,534,000		$	1,544,534,000		$	—		$	—
Exchange-Traded Futures Contracts
United States Contracts			114,437,224			114,437,224			—			—

Effective January 1, 2009, USO adopted the provisions of Accounting Standards Codification 815 — Derivatives and Hedging, which require presentation of qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts and gains and losses on derivatives.

Fair Value of Derivative Instruments



		Condensed Statements of		Fair Value			Fair Value
		Financial		at March 31,			at December 31,
Derivatives not Accounted for as Hedging Instruments		Condition Location		2022			2021
Futures - Commodity Contracts		Assets		$	269,339,826		$	114,437,224
Swap - Commodity Contracts		Liabilities		$	(1,287)		$	—

The volume of open OTC swap positions relative to the net assets of USO at the date of this report is generally representative of open positions throughout the reporting period.

The Effect of Derivative Instruments on the Condensed Statements of Operations

For the three months ended

For the three months ended

March 31, 2022

March 31, 2021

Change in

Change in

Location of

Realized

Unrealized

Realized

Unrealized

Derivatives not

Gain (Loss)

gain (Loss)

Gain (Loss) on

Gain (Loss)

Gain (Loss) on

Accounted for

on Derivatives

on Derivatives

Derivatives

in Derivatives

Derivatives

as Hedging

Recognized in

Recognized in

Recognized in

Recognized in

Recognized in

Instruments

Income

Income

Income

Income

Income

Futures - Commodity Contracts

Realized gain (loss) on closed positions

$

636,420,317

$

775,473,170

Change in unrealized gain (loss) on open positions

$

154,902,602

$

(48,013,241)

OTC Swap-Commodity Contracts

Realized gain (loss) on closed positions

$

31,522,990

$

—

Change in unrealized gain (loss) on open positions

$

(1,287)

$

—

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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