USO fund returns lag oil prices due to costly futures roll strategy and fees.

The United States Oil Fund (USO) has underperformed the spot price of West Texas Intermediate crude over the past decade, returning just 22.01% compared to oil's rise from $48.76 to about $84.65 per barrel. This underperformance is mainly due to the fund's structure, which involves rolling short-dated futures contracts monthly. When the futures market is in contango, USO sells cheaper expiring contracts and buys more expensive ones, causing a recurring loss known as roll decay. Additionally, USO's expense ratio and tax reporting complexities add to the costs. Alternatives like the United States 12 Month Oil Fund (USL) and energy sector ETFs offer different ways to gain oil exposure with less roll-related drag. Investors should understand that USO is more a tactical tool than a long-term strategic investment in oil prices.