USO ETF Review: Is United States Oil Fund Worth Buying?

United States Oil Fund tracks crude oil futures prices using front-month WTI contracts, providing the most direct ETF exposure to short-term oil price movements — but with significant roll cost drag that makes it unsuitable for long-term holding.

Last updated: 2026-02-02 · Data: Yahoo Finance, fund prospectuses, SEC filings

What Is USO?

The United States Oil Fund tracks the performance of West Texas Intermediate (WTI) crude oil through futures contracts. Managed by United States Commodity Funds, USO provides direct exposure to oil prices without the operational risks of individual energy companies. The fund primarily holds near-month WTI crude oil futures contracts on NYMEX.

Expense ratio: 0.70% | AUM: $886M | Inception: April 2006

Current Snapshot

Why It Matters for Real Asset Investors

USO serves as the most direct oil exposure in the Energy Macro framework, functioning as both a debasement hedge and an inflation signal. When central banks devalue currencies through money printing, oil often rises faster than paper assets because energy remains a real, finite resource that powers the global economy.

Unlike energy stocks that carry operational and geopolitical risks, USO tracks the commodity itself through futures contracts. This matters because oil behaves as a leading indicator of inflation—rising energy costs flow through every sector from transportation to manufacturing. For real asset investors, USO provides pure commodity exposure without the balance sheet risks of individual oil companies.

However, USO struggles during economic contractions when demand destruction overwhelms supply constraints. The fund also faces structural headwinds from contango (when future oil prices trade above current prices), which creates negative roll yield as contracts expire and must be replaced at higher prices.

Top Holdings

USO doesn't hold traditional securities but rather futures contracts and cash equivalents:

• WTI Crude Oil Futures (Near Month): Primary exposure to oil prices
• U.S. Treasury Bills: Cash management for margin requirements
• Short-term Money Market Instruments: Collateral for futures positions

The fund typically holds the front-month WTI futures contract, rolling to the next month's contract as expiration approaches. This rolling process can create tracking error during periods of steep contango or backwardation in the oil futures curve.

How It Fits the Portfolio

USO works best as a tactical allocation representing 2-5% of a real asset portfolio, used primarily as an inflation hedge and dollar debasement play. It pairs well with energy infrastructure ETFs like AMLP or ENFR, which provide income while USO captures pure price movement.

The key timing consideration involves the futures curve structure. During backwardation (when near-term contracts trade above future contracts), USO benefits from positive roll yield. During contango, the opposite occurs. Monitor the WTI curve on CME to gauge structural tailwinds or headwinds.

I view USO as a regime-dependent holding rather than a core position. It serves its purpose when inflation expectations rise or during supply disruption events, but it can destroy value during extended demand destruction cycles.

Regime Signals

USO outperforms during three primary conditions: dollar weakness periods when commodities rise relative to paper assets, supply disruption events (geopolitical tensions, OPEC cuts, hurricane seasons), and early-cycle inflation when demand recovers faster than supply capacity.

The fund struggles during demand destruction phases (economic contractions), sustained contango periods that create negative roll yield, and dollar strength cycles when commodities face currency headwinds. Watch the dollar index (DXY) inverse correlation and the shape of the WTI futures curve for positioning signals.

Rising oil prices often precede broader inflation by 3-6 months, making USO both a beneficiary of and leading indicator for inflationary environments that favor real assets over financial assets.

Related Research

• Alabama Power Grid Risk Assessment
• NextEra Energy (NEE) Tollbooth Analysis
• XLE: Energy Select Sector SPDR
• XOP: SPDR S&P Oil & Gas Exploration
• VDE: Vanguard Energy ETF

Frequently Asked Questions

Is USO a good way to invest in oil?

USO is effective for short-term tactical trades on oil price direction but is poorly designed for long-term holding. The fund rolls expiring front-month futures contracts into the next month, incurring costs when the oil futures curve is in contango (longer-dated contracts are more expensive). This roll cost can erode 5-10% annually, meaning USO can lose money even when oil prices are flat. For longer-term oil exposure, energy equities (XLE, XOP) are superior.

What is the expense ratio of USO?

USO charges a 0.60% management fee, but the real cost is the futures roll drag that can add 5-10% in annual costs during contango periods. The total cost of ownership is therefore much higher than the stated expense ratio suggests. Investors should view USO as a trading instrument, not an investment vehicle, and factor in the full cost of futures roll when evaluating holding-period returns.

Why does USO underperform crude oil over time?

USO's chronic underperformance versus spot crude oil is caused by contango in the oil futures curve. When USO sells expiring front-month contracts and buys the next month at higher prices, it loses money on each roll. Over years, this negative roll yield compounds dramatically. From 2009-2024, crude oil roughly doubled while USO lost money — a stark illustration of why futures-based commodity ETFs are unsuitable for buy-and-hold investors.

When should investors use USO?

USO is appropriate for short-term trades (days to weeks) when you have a directional view on oil prices and want liquid, leveraged exposure without opening a futures account. It is also used for hedging purposes — airlines, trucking companies, and other oil consumers use USO to hedge fuel costs over short periods. For Energy Macro investors, USO is a tactical tool, not a portfolio building block.

For our complete allocation framework across real assets, infrastructure, and income strategies, see The Blackout Fortune Playbook.

Last updated: February 1, 2026 | Data: Yahoo Finance, ETF provider filings