What Is USO? United States Oil Fund, WTI Futures, Roll Strategy, Contango and Risks Explained

Summary

The United States Oil Fund, LP (NYSE Arca: USO) is an exchange-traded commodity product designed to provide daily exposure related to the price of light, sweet crude oil delivered to Cushing, Oklahoma, commonly associated with the West Texas Intermediate, or WTI, market.

However, USO does not buy barrels of crude oil and store them for investors.

Instead, USO primarily uses oil futures contracts, particularly short-dated NYMEX light sweet crude oil futures, together with cash, U.S. government obligations and, when appropriate, other oil-related financial instruments. USCF, USO's general partner, describes USO as a commodity pool that issues shares traded on NYSE Arca. Its shares began trading on April 10, 2006.

This creates an important investment chain:

WTI Crude Oil Market

↓

NYMEX WTI Futures

↓

USO Futures Portfolio

↓

USO NAV and Market Price

Investors therefore should not assume:

USO price = WTI spot price.

USCF explicitly warns that an investment in USO should not be viewed as a direct investment in either light sweet crude oil or the benchmark futures contract.

Beginning in 2026, another detail became particularly important: USO changed to a five-day monthly roll process. During that five-day period, it generally seeks to rebalance approximately 20% per day of the relevant near-month exposure into its remaining portfolio holdings, including further-dated contracts.

For eligible users interested in a tokenized product linked to USO, MEXC provides the OIL(USOON)/USDT spot market. OIL(USOON) is an Ondo tokenized product whose underlying reference is USO; it is not a tokenized barrel of physical crude oil.

Trade OIL(USOON)/USDT on MEXC

What Is the United States Oil Fund?

USO is formally known as the United States Oil Fund, LP.

It is organized as a Delaware limited partnership and managed by United States Commodity Funds LLC (USCF).

USO's shares trade on NYSE Arca, which makes the product easy to buy and sell through securities-market infrastructure.

But its legal and investment structure is different from buying shares in an ordinary operating company.

USCF's latest annual filing describes USO as a:

commodity pool that issues limited partnership interests traded on NYSE Arca.

USCF is registered with the Commodity Futures Trading Commission as a commodity pool operator and is a member of the National Futures Association.

Is USO an ETF?

Investors commonly search for terms such as:

• USO ETF;
• oil ETF;
• WTI ETF;
• crude oil ETF.

Those search terms are understandable because USO trades on an exchange like an ETF.

However, technically, it is more precise to describe USO as an exchange-traded commodity pool/security, rather than treating it as a conventional equity ETF registered under the Investment Company Act of 1940.

USCF's SEC filing specifically identifies USO as a commodity pool, while separately identifying its 1940 Act ETF trust products.

Therefore, throughout this article, “oil ETF” may describe the common search category, but United States Oil Fund or exchange-traded oil product is more precise.

What Is USO Trying to Track?

USO's investment objective is based on the daily movement of the spot price of light sweet crude delivered to Cushing, Oklahoma—but that exposure is measured through a specified futures contract called the Benchmark Oil Futures Contract.

USCF states that USO seeks for the daily percentage movement in its NAV to reflect the daily percentage movement in that benchmark futures contract, plus interest on collateral and less fund expenses.

That creates an important distinction:

WTI Spot Market

is the economic commodity reference,

while:

Benchmark Oil Futures Contract

is the financial instrument used to implement the strategy.

What Is the Benchmark Oil Futures Contract?

Under USO's current methodology, the benchmark is generally the near-month NYMEX futures contract for light, sweet crude oil delivered to Cushing, Oklahoma.

When the fund rolls its exposure, the benchmark transitions into the next-month contract.

For example:

Suppose the relevant futures contracts are:

September WTI

and:

October WTI

As USO approaches its scheduled roll period, exposure can transition from September to October rather than holding the September futures contract through final expiration and physical-delivery procedures.

Does USO Own Physical Crude Oil?

No.

USO should not be interpreted as a warehouse holding barrels of oil on behalf of shareholders.

Its portfolio primarily consists of oil futures and related financial instruments, supported by collateral such as:

• Cash;
• Cash equivalents;
• Short-term U.S. government obligations.

USCF also retains the ability to use other oil-related investments, including certain swaps, forwards and other futures, when market, regulatory, liquidity or risk-management conditions make that appropriate.

So the structure is:

Oil market

→

Derivatives exposure

→

USO

rather than:

Oil barrels

→

USO shareholders.

Why Doesn't USO Simply Hold One Futures Contract Forever?

Futures expire.

If a fund wants to maintain continuing crude-oil exposure, it cannot simply keep one near-month contract indefinitely.

It must periodically:

Sell or reduce the expiring/near-month contract

and:

Buy or increase exposure to a later contract

This process is called rolling futures.

How Does USO Roll Futures in 2026?

This is particularly important because older USO articles can describe an outdated schedule.

Beginning January 1, 2026, USCF states that USO uses a five-day roll period.

During each day of that roll period, USO generally seeks to rebalance approximately 20% of the announced percentage of relevant near-month exposure into the remaining portfolio holdings, including further-dated contracts and any newly specified holdings.

The simplified process is:

Day 1

Roll approximately 20%.

Day 2

Roll another approximately 20%.

Day 3

Another approximately 20%.

Day 4

Another approximately 20%.

Day 5

Complete the remaining approximate 20%.

Actual holdings and projected roll dates should always be checked through USCF because schedules can change without notice.

Why Does the Futures Roll Matter?

Because futures for different expiration months can trade at different prices.

The shape of the futures curve can affect returns independently of the absolute level of crude oil.

Two particularly important conditions are:

Contango

and:

Backwardation.

What Is Contango?

Contango occurs when later-dated futures trade above shorter-dated contracts.

A simplified example:

Near-month WTI: $70

Next-month WTI: $72

If a strategy reduces exposure at around $70 and establishes later exposure around $72, it is moving into a more expensive contract.

Over repeated rolls, prolonged contango can create a structural headwind.

USCF specifically warns that prolonged contango can materially reduce USO's NAV and total return even without a comparable fall in crude-oil prices.

What Is Backwardation?

Backwardation is the opposite.

For example:

Near-month WTI: $75

Next-month WTI: $72

The later contract is cheaper.

USCF explains that when the near-month contract trades above the next-month contract, the benchmark can experience different roll dynamics as the contracts approach expiration.

Backwardation can therefore be more favorable to a short-dated futures strategy than persistent contango, all else equal.

Does That Mean Roll Yield Is Always Negative in Contango?

Investors should avoid reducing the entire process to one simple guaranteed formula.

Actual performance depends on:

• How the futures curve changes;
• Exactly when positions are rolled;
• Which contracts USO owns;
• Changes in spot oil;
• Collateral interest;
• Expenses;
• Other portfolio instruments.

However, persistent contango is generally an important potential headwind for futures-based oil exposure.

Why Can USO Underperform WTI Over a Long Period?

Suppose WTI begins a year at $70 and ends near $70.

An investor might expect USO to finish unchanged.

But that does not necessarily happen.

USO's result can reflect:

WTI movement

Futures-curve effects

Collateral interest

−

Fund expenses

/−

Tracking differences

Therefore, two years with the same beginning and ending WTI price can produce different USO returns if their futures curves are different.

Can USO Outperform the Change in Spot Oil?

Yes.

Backwardation, favorable collateral income or changing futures relationships can sometimes support USO's return relative to a simple spot-price comparison.

The central point is not that USO must always underperform WTI.

It is:

USO and spot WTI are different exposures.

How Does Collateral Interest Affect USO?

Futures contracts usually require only part of the notional exposure to be posted as margin.

USO holds substantial collateral in cash, cash equivalents and short-term U.S. government obligations.

Interest earned on that collateral forms part of the fund's investment objective calculation.

When short-term interest rates are higher, collateral income can become more economically meaningful.

How Does USO's Market Price Relate to Its NAV?

USO shares trade on NYSE Arca.

Like other exchange-traded products, the market price can temporarily trade:

above NAV

= premium

or:

below NAV

= discount.

USCF publishes premium/discount information and calculates USO's NAV generally around 4:00 p.m. Eastern Time.

This creates another distinction between:

USO portfolio value

and:

the price investors are currently willing to pay for USO shares.

What Happened to Oil Products in 2020?

The 2020 crude-oil crisis is an important reminder of futures-specific risk.

Extreme market conditions, position limits and risk-management measures forced USO to use contracts further along the futures curve and other oil-related investments.

USCF notes that it later transitioned back toward primarily using its Benchmark Oil Futures Contract, completing that transition by early 2024. It nevertheless retains flexibility to use further-dated contracts and other instruments when necessary.

This means investors should understand not just the stated benchmark but the fund's actual holdings.

What Are the Main Risks of USO?

Crude-Oil Price Risk

WTI prices can fall rapidly because of:

• Global demand;
• OPEC+ policy;
• U.S. production;
• inventories;
• geopolitics;
• recession.

Contango Risk

Persistent contango can create a significant long-term headwind.

Tracking Risk

USO does not promise to reproduce spot WTI tick for tick.

Futures-Market Risk

Liquidity, position limits, exchange rules and margin requirements can affect the portfolio.

Collateral and Interest-Rate Risk

Collateral income can change as interest rates change.

Geopolitical Risk

War, sanctions and transportation disruptions can cause abrupt oil-market moves.

USO vs an Oil Company Stock

USO is also very different from buying an oil producer such as Occidental Petroleum.

An oil-company stock depends on:

• Production;
• costs;
• debt;
• management;
• dividends;
• reserves;
• capital expenditure.

USO primarily reflects a futures-based oil-price strategy.

Therefore:

USO is commodity-price exposure through derivatives, not equity in an oil producer.

What Is OIL(USOON)?

Ondo offers a tokenized product called USOon, whose underlying asset is the United States Oil Fund.

MEXC displays this product as:

OIL(USOON)

and provides the trading pair:

OIL(USOON)/USDT.

The complete structure becomes:

WTI

↓

WTI Futures

↓

USO

↓

Ondo USOon

↓

MEXC OIL(USOON)/USDT

This is why OIL(USOON) should not simply be called “tokenized WTI.”

What About MEXC RealStocks?

MEXC also offers a separate product called RealStocks, developed with regulated brokers to provide eligible users with access to real U.S.-listed shares and associated ownership benefits. That is structurally different from an Ondo tokenized product.

Availability of any specific U.S.-listed security should always be checked in the live RealStocks interface rather than assumed from its general product description.

What Is RealStocks?

FAQ

What is USO?

USO is the United States Oil Fund, LP, an exchange-traded commodity pool whose shares trade on NYSE Arca.

Is USO a stock?

No. It is not equity in an operating company.

Is USO a normal ETF?

It trades like an exchange-traded product, but legally it is a commodity pool rather than a conventional 1940 Act equity ETF.

Does USO own physical crude oil?

No. It primarily uses oil futures and related investments.

Does USO perfectly track WTI?

No. Futures rolls, contango, backwardation, collateral income, expenses and tracking differences can affect returns.

How does USO roll futures in 2026?

USCF uses a five-day roll period beginning in 2026, generally rebalancing roughly 20% of the relevant exposure per day.

What is OIL(USOON)?

It is the MEXC display name for an Ondo tokenized product linked to USO.

Where can eligible users trade OIL(USOON)?

Trade OIL(USOON)/USDT on MEXC

Risk Disclaimer

This article is provided for informational and educational purposes only and does not constitute investment, financial, legal, accounting or tax advice.

USO involves crude-oil futures, commodity-price volatility, futures-curve risk, contango, backwardation, tracking differences, collateral, liquidity and regulatory risks. It should not be treated as equivalent to owning physical crude oil.

OIL(USOON) introduces additional Ondo issuer, backing, token tracking, blockchain, USDT, liquidity, centralized-exchange custody and jurisdictional risks.