USO Up 65% This Year, Down 77% From What It Should Be

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If you bought the United States Oil Fund (NYSEARCA:USO) ten years ago to ride a long-term crude rebound, you are sitting on a total return of 22.46%. Crude oil itself has swung from $16.55 in April 2020 to $114.84 in June 2022 and back to $84.65 on June 15, 2026. The barrel moved. Your shares barely did. That gap is the hidden cost.

What you are actually paying

USO holds front-month NYMEX WTI futures contracts, not physical barrels, and rolls them forward every month. When the futures curve is in contango (later contracts priced higher than the near month), the fund sells the cheap expiring contract and buys the more expensive next one. Repeat that twelve times a year, and you bleed NAV even when spot crude is flat.

The sponsor’s published expense ratio is one line item. Roll decay is the line item that is not on the fact sheet. Over the past decade, while WTI cycled through a $16 trough and a $114 peak, the fund compounded to roughly $12,246 per $10,000 invested. A spot-tracking instrument would have captured far more of those swings. The difference is the structural toll, paid monthly, in silence.

The part the factsheet does not highlight

Two more costs hide inside the wrapper. First, the tax form. USO is organized as a commodity pool limited partnership, which means holders receive a Schedule K-1, not the 1099 most ETF investors expect. Gains are marked to market under Section 1256, taxed 60% long-term and 40% short-term regardless of holding period. Hold the fund one day or one year, the IRS treats your gain the same way, and your CPA bills extra for the K-1.

Second, the geopolitical premium baked into the current price. USO is up 65.17% year to date through June 17, 2026, propelled by a Strait of Hormuz disruption. That tailwind cuts both ways. A 24/7 Wall St. analysis published May 31, 2026 warned the rally “could quickly unwind if the strait reopens, as crude oil futures would likely fall and USO’s current roll yield advantage would disappear.” The fund has already given back 14.94% in the past week and 23.48% in the past month. When the curve flips back into contango, the daily decay returns with it.

The cheaper mirror

If you want crude exposure without the front-month bleed, lower-friction options exist. USL, the United States 12 Month Oil Fund, spreads its roll across twelve different contract months, softening contango bite. DBO, the Invesco DB Oil Fund, uses an optimized roll that selects contracts to minimize decay. BNO offers Brent exposure for global pricing. And if you want oil without futures at all, energy-equity ETFs like energy-sector equity ETFs give you producer earnings, dividends, a standard 1099, and zero roll mechanics. The trade-off: equity ETFs track oil companies, not the barrel directly, so they can lag a pure spot rally but avoid the slow leak in flat or contango markets.

What this means for you

USO works as a short-term trading vehicle rather than a buy-and-hold proxy for crude. Reddit’s top USO post this quarter is a position betting against $150 oil, which tells you who is actually using the fund. Before your next purchase, the real question is whether the contract curve, the K-1, and the daily roll will let you keep what oil gives you.

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