UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date
of
Report (Date of earliest event reported) April
20, 2007
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UNITED
STATES OIL FUND, LP
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(Exact
name of registrant as specified in its charter)
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Delaware
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001-32824
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20-2830691
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(I.R.S.
Employer
Identification
No.)
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1320
Harbor Bay Parkway, Suite 145
Alameda,
California 94502
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(Address
of principal executive offices)
(Zip
Code)
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Registrant's
telephone number, including area code
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(510)
522-3336
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Not
Applicable
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(Former
name or former address, if changed since last report)
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Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General
Instruction A.2. below):
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Written
communication pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4c))
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Item
8.01 Other Events.
On
April
19, 2007, the Wall Street Journal reported that many exchange traded funds
have
begun “diverging widely from the performance of the benchmarks they are supposed
to follow” (see“Why
Hot
Funds Are Tripping Up Some Investors,” D. Gullapalli, WSJ, 4/19/07, p.1 (the
“WSJ article”)), and cited the United States Oil Fund, LP (“USO” or the “Fund”)
as an example of such a fund. Because of USO’s status as a limited partnership,
it is restricted by Federal securities regulations from using “free writing
prospectuses” (as defined in Rule 405 under the Securities Act of 1933) despite
its asset size and that its units are traded on the American Stock Exchange.
In
such situations, free writing prospectuses could include a media publication
for
which USO provided information if such publication is viewed as an “offer” of
USO units. As a result, USO typically responds to press inquiries with “no
comment”. However, USO believes it is obligated to respond to the WSJ article in
order to provide factual information in response to what it believes to be
either a significant mischaracterization of its investment objective, or a
miscalculation of the total returns over the reported time period of USO’s
benchmark, as well as whether or not it is meeting that objective. USO in no
way
intends that the information included in this Form 8-K be considered an “offer”
of its units.
As
stated
in USO’s current prospectus, the investment objective of the Fund is for the
changes in percentage terms of the Fund’s units’ net asset value to reflect the
changes in percentage terms of the spot price of West Texas Intermediate light,
sweet crude oil delivered to Cushing, Oklahoma (“WTI Oil”), measured by the
changes in the price of the futures contract on WTI Oil as traded on the New
York Mercantile Exchange that is the near month contract to expire (except
when
the near month contract is within two weeks of expiration, in which case the
futures contract will be the next month to expire) (the “Benchmark Futures
Contract”), less USO’s expenses. It is not the intent of USO to be operated in a
fashion such that its net asset value will equal, in dollar terms, the dollar
price of the spot price of WTI Oil or any particular futures contract based
on
WTI Oil. USO typically reports its total return results in its periodic filings
measured over both the most recent 30 valuation days prior to the date of the
periodic filing, and since the inception of the fund in April of
2006.
In
calculating the total returns of USO’s benchmark over any period of time, the
Fund’s prospectus makes clear that the calculation is made by using the daily
percentage movement of the Benchmark Futures Contract over the reported time
period. USO believes that attempting to estimate the total return of the
benchmark by simply taking the price of the Benchmark Futures Contract on the
first day of the reporting period, and comparing it to the price of the
Benchmark Futures Contract on the last day of the reporting period (and so
not
using the daily percentage movements of each valuation days in-between), can
lead to a result that will vary significantly from the actual benchmark results
using USO’s described methodology. If the Wall Street Journal used any method of
estimating the total return of USO’s benchmark other than the method described
in USO’s prospectus of using the daily percentage movements, than the results
the Wall Street Journal would calculate could vary widely from the Benchmark’s
actual results. If the Wall Street Journal used incorrect benchmark results
in
an article, it would tend to cause investors to incorrectly compare USO’s actual
total returns over time to the targeted total returns of USO’s benchmark and
draw erroneous conclusions as to USO’s ability to track its Benchmark’s total
returns.
As
exemplified by its performance last year, reported in USO’s 2006 report on Form
10-K under “Management’s Discussion and Analysis of Financial Condition and
Results of Operation,” USO believes it has met this objective. More
specifically, for the 30 valuation days ending December 31, 2006, the simple
average daily change in the Benchmark Futures Contract was -0.004%, while the
simple average daily change in the net asset value of USO over the same time
period was -0.021%. The average daily difference was 0.017% or 1.7 basis points,
where 1 basis point equals 1/100 of 1%. As a percentage of the daily movement
of
the benchmark oil futures contract, the average error in daily tracking by
the
net asset value was 3%, meaning that over this time period USO’s tracking error
was within the plus or minus 10% range established as its benchmark tracking
goal.
The
following charts, included in USO’s 2006 Form 10-K, reflect the tracking results
of USO and its units total return vs. the Benchmark Futures
Contract.
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Whether
or not USO has met its investment objective, there are, as disclosed in the
Fund’s prospectus, significant factors that can influence the total return on an
investment in USO. For example, we have disclosed in the prospectus that the
price relationship between the near month contract and the next to near month
contract that compose the Benchmark Futures Contract will vary and may impact
both the total return over time of USO’s net asset value, as well as the degree
to which its total return tracks other natural gas price indices’ total returns.
In the event of an oil futures market where near month contracts trade at a
higher price than next to near month to expire contracts (a situation described
as “backwardation” in the futures market), then absent the impact of the overall
movement in oil prices, the value of the Benchmark Futures Contract would tend
to rise as it approaches expiration. As a result, the total return of the
Benchmark Futures Contract would tend to track higher. Conversely, in the event
of an oil futures market where near month contracts trade at a lower price
than
next to near month contracts (a situation described as “contango” in the futures
market), then absent the impact of the overall movement in natural gas prices,
the value of the Benchmark Futures Contract would tend to decline as it
approaches expiration. As a result, the total return of the Benchmark Futures
Contract would tend to track lower. In addition, when compared to total return
of other price indices, such as the spot price of oil, the impact of
backwardation and contango may lead the total return of USO’s net asset value to
vary significantly. In the event of a prolonged period of contango, and
absent the impact of rising or falling natural gas prices, this could have
a
significant negative impact on USO’s net asset value and total
return.
USO
is of
the view that the best source of information regarding the fund’s investment
objective and the risks associated with an investment in USO is it most current
prospectus and the periodic reports it files with its regulators, including
the
Securities and Exchange Commission. Copies of the most current version of the
foregoing can be found at USO’s website, www.unitedstatesoilfund.com
or
through the SEC through their website, www.sec.gov.
Copies
are also available on request from the USO’s general partner, Victoria Bay Asset
Management LLC.
For
further information, please call:
Victoria
Bay Asset Management
Katie
Rooney 818-206-8148
krooney@unitedstatesoilfund.com
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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UNITED STATES OIL FUND, LP | |
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By: |
Victoria
Bay Asset Management, LLC, its general partner
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| Date: April 20, 2007 | By: |
/s/
Nicholas D. Gerber
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Name: Nicholas
D. Gerber
Title: Chief
Executive Officer
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