**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-K**




**x**
            **Annual
                report pursuant to Section 13 or 15(d) of the Securities Exchange Act
                of 1934 for the fiscal year ended December 31, 2006.**




** ̈**
            **Transition
                report pursuant to Section 13 or 15(d) of the Securities Exchange Act
                of 1934 for the transition period from********to********.**




Commission
      file number: 001-32834




**United
      States Oil Fund, LP**


**(Exact
      name of registrant as specified in its charter)**




**Delaware**
            
            **20-2830691****(State
                or other jurisdiction of****incorporation
                or organization)**
            
            **(I.R.S.
                Employer****Identification
                No.)**




**1320
      Harbor Bay Parkway, Suite 145**


**Alameda,
      California 94502**


**(Address
      of principal executive offices)**




**(510)
      522-3336**


**(Registrant’s
      telephone number, including area code)**




**Securities
      registered pursuant to Section 12(b) of the Act:**




**(Title
      of class)**     **(Name of exchange on which registered)**




Units American
      Stock
      Exchange





**Securities
      registered pursuant to Section 12(g) of the Act: None**




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


 ̈ Yes x No





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act.


 ̈ Yes x No





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months (or for such shorter period that the registrant
      was required to file such reports), and (2) has been subject to such filing
      requirements for the past 90 days.


x Yes  ̈ No





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
      be contained, to the best of registrant’s knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-K
      or any amendment to this Form 10-K.


x Yes  ̈ No




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one.)


Large
      accelerated filer  ̈ Accelerated
      filer  ̈ Non-accelerated
      filer x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act.).


 ̈ Yes x No


The
        aggregate market value of the registrant’s common stock held by non-affiliates
        of the registrant as of June 30, 2006 was: $265,126,000.
  The
        registrant had 18,800,000 outstanding units as of March 26, 2007.


**DOCUMENTS
      INCORPORATED BY REFERENCE:**


None.








**UNITED
                  STATES OIL FUND, LP****Table
                  of Contents****Part
                  I.**
              
              **Page**Item
                  1. Business
              
              1Item
                  1A. Risk Factors
              
              32Item
                  1B. Unresolved Staff Comments
              
              48Item
                  2. Properties
              
              48Item
                  3. Legal Proceedings
              
              49Item
                  4. Submission of Matters to a Vote of Security
                  Holders
              
              50**Part
                  II.**Item
                  5. Market for Registrant's Common Equity, Related
                  StockholderMatters
                  and Issuer Purchases of Equity
                  Securities
              
              50Item
                  6. Selected Financial Data
              
              51Item
                  7. Management's Discussion and Analysis of Financial
                  Conditionand
                  Results of Operation
              
              52Item
                  7A. Quantitative and Qualitative Disclosures About
                  Market Risk
              
              60Item
                  8. Financial Statements and Supplementary
                  Data
              
              61Item
                  9. Changes in and Disagreements with Accountants onAccounting
                  and Financial Disclosure
              
              72Item
                  9A. Controls and Procedures
              
              72Item
                  9B. Other Information
              
              72**Part
                  III.**Item
                  10. Directors and Executive Officers and
                  Corporate Governance
              
              73Item
                  11. Executive Compensation
              
              76Item
                  12. Security Ownership of Certain Beneficial Owners
                  andManagement
                  and Related Stockholder
                  Matters
              
              77Item
                  13. Certain Relationships and Related
                  Transactions and Director Independence
              
              77Item
                  14. Principal Accounting Fees and
                  Services
              
              77**Part
                  IV.**Item
                  15. Exhibits, Financial Statement
                  Schedules
              
              78Exhibit
                  Index
              
              78Signatures
              
              79


**Part
        I**





**Item 1.**
            **Business.**




**What
        is USOF?**
  United
        States Oil Fund, LP ("USOF") is a Delaware limited partnership organized on
        May 12, 2005. USOF maintains its main business office at 1320 Harbor Bay
        Parkway, Suite 145, Alameda, California 94502. USOF is a commodity pool.
        It
        operates pursuant to the terms of the Third Amended and Restated Agreement
        of
        Limited Partnership dated as of January 19, 2007 ("LP Agreement"),
        which grants full management control to the General Partner.
  **Who
        is the General Partner?**
  Our
        sole
        General Partner is Victoria Bay Asset Management, LLC, a single member limited
        liability company that was formed in the state of Delaware on May 10, 2005
        and
        which changed its name on June 10, 2005. It maintains its main business office
        at 1320 Harbor Bay Parkway, Suite 145, Alameda, California 94502. The General
        Partner is a wholly-owned subsidiary of Wainwright Holdings, Inc., a Delaware
        corporation (“Wainwright”). Mr. Nicholas Gerber (discussed below) controls
        Wainwright by virtue of his ownership of Wainwright’s shares. Wainwright is a
        holding company that also owns an insurance company organized under Bermuda
        law
        and a registered investment adviser firm named Ameristock Corporation. The
        General Partner is a member of the National Futures Association ("NFA") and
        is
        registered with the Commodity Futures Trading Commission ("CFTC") as of December
        1, 2005. The General Partner’s registration as a Commodity Pool Operator ("CPO")
        was approved on December 1, 2005.
  On
        September 8, 2006, the General Partner formed United States Natural Gas Fund,
        LP
        ("USNG'), another limited partnership that will be a commodity pool and intends
        to issue units to be traded on the American Stock Exchange. The investment
        objective of USNG is for the changes in percentage terms of the unit’s net asset
        value to reflect the changes in percentage terms of the price of natural
        gas
        delivered at the Henry Hub, Louisiana as measured by the “Benchmark Futures
        Contract,” less USNG’s expenses. The General Partner is the general partner of
        USNG and will be responsible for the management of the USNG. Wainwright will
        be
        the initial limited partner of USNG.
  The
        General Partner is required to evaluate the credit risk for USOF to the futures
        commission merchant, oversee the purchase and sale of USOF’s units by certain
        Authorized Purchasers, review daily positions and margin requirements of
        USOF,
        and manage USOF’s investments. The General Partner also pays the fees of ALPS
        Distributors, Inc. ("Marketing Agent"), Brown Brothers Harriman & Co.
        ("Administrator"), and Brown Brothers Harriman & Co.
        ("Custodian").
 Limited
          partners have no right to elect the General Partner on an annual or any
          other
          continuing basis. If the General Partner voluntarily withdraws, however,
          the
          holders of a majority of our outstanding limited partner interests (excluding
          for purposes of such determination interests owned by the withdrawing General
          Partner and its affiliates) may elect its successor. The General Partner
          may not
          be removed as general partner except upon approval by the affirmative vote
          of
          the holders of at least 66 2/3 percent of our outstanding limited partnership
          interests (excluding limited partnership interests owned by the General
          Partner
          and its affiliates), subject to the satisfaction of certain conditions
          set forth
          in the LP Agreement.
  The
          business and affairs of our General Partner are managed by a board of directors,
          which is comprised of four management directors who are also its executive
          officers (“Management Directors”) and three independent directors who meet the
          independent director requirements established by the American Stock Exchange
          and
          the Sarbanes-Oxley Act of 2002. Notwithstanding the foregoing, the Management
          Directors have the authority to manage the General Partner pursuant to
          its
          Limited Liability Company Agreement. The General Partner has an audit committee
          which is made up of the three independent directors (Peter M. Robinson,
          Gordon
          L. Ellis, and Malcolm R. Fobes III). The audit committee is governed by
          an audit
          committee charter that is posted on USOF’s website. Mr. Fobes and
          Mr. Ellis meet the financial sophistication requirements of the American
          Stock Exchange and the audit committee charter. Through its Management
          Directors, the General Partner manages the day-to-day operations of
          USOF.
 1
 **How
          Does USOF Operate?**
  The
          net
          assets of USOF consist primarily of investments in futures contracts for
          West
          Texas Intermediate ("WTI") light, sweet crude oil, but may also consist
          of other
          types of crude oil, heating oil, gasoline, natural gas and other petroleum-based
          fuels that are traded on the New York Mercantile Exchange, ICE Futures
          or other
          U.S. and foreign exchanges (collectively, “Oil Futures Contracts”). USOF may
          also invest in other oil-related investments such as cash-settled options
          on Oil
          Futures Contracts, forward contracts for oil, and over-the-counter transactions
          that are based on the price of oil and other petroleum-based fuels, Oil
          Futures
          Contracts and indices based on the foregoing (collectively, “Other Oil
          Interests”). For convenience and unless otherwise specified, Oil Futures
          Contracts and Other Oil Interests collectively are referred to as “oil
          interests” in this annual report on Form 10-K.
  USOF
          invests in oil interests to the fullest extent possible without being leveraged
          or unable to satisfy its current or potential margin or collateral obligations
          with respect to its investments in Oil Futures Contracts and Other Oil
          Interests. In pursuing this objective, the primary focus of the General
          Partner
          is the investment in Oil Futures Contracts and the management of its investments
          in short-term obligations of the United States of two years or less
          (“Treasuries”), cash and cash equivalents for margining purposes and as
          collateral.
  The
          investment objective of USOF is for the changes in percentage terms of
          the
          units’ net asset value ("NAV") to reflect the changes in percentage terms of the
          spot price of WTI light, sweet crude oil delivered to Cushing, Oklahoma,
          as
          measured by the changes in the price of the futures contract on WTI light,
          sweet
          crude 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.
  USOF
          seeks to achieve its investment objective by investing in a mix of Oil
          Futures
          Contracts and Other Oil Interests such that changes in USOF’s NAV will closely
          track the changes in the price of a specified Oil Futures Contract (“Benchmark
          Oil Futures Contract”). The General Partner believes changes in the price of the
          Benchmark Oil Futures Contract have historically exhibited a close correlation
          with the changes in the spot price of WTI light, sweet crude oil. On any
          valuation day (a valuation day is any day as of which USOF calculates its
          NAV),
          the Benchmark Oil Futures Contract is the near month contract for WTI light,
          sweet crude oil traded on the New York Mercantile Exchange unless the near
          month
          contract will expire within two weeks of the valuation day, in which case
          the
          Benchmark Oil Futures Contract is the next month contract for WTI light,
          sweet
          crude oil traded on the New York Mercantile Exchange.
  More
          specifically, the General Partner endeavors to place USOF’s trades in Oil
          Futures Contracts and Other Oil Interests and otherwise manage USOF’s
          investments so that A will be within plus/minus 10 percent of B,
          where:
 **·**
                A
                    is the average daily change in USOF’s NAV for any period of 30 successive
                    valuation days, and
 **·**
                B
                    is the average daily change in the price of the Benchmark Oil
                    Futures
                    Contract over the same period.
  The
          General Partner believes that market arbitrage opportunities cause changes
          in
          USOF’s unit price on the American Stock Exchange to closely track changes in
          USOF’s NAV. The General Partner further believes that the prices of the
          Benchmark Oil Futures Contract have historically closely tracked the spot
          prices
          of WTI light, sweet crude oil. The General Partner believes that the net
          effect
          of these two relationships and the expected relationship described above
          between
          USOF’s NAV and the Benchmark Oil Futures Contract, will be that the changes
          in
          the price of USOF’s units on the American Stock Exchange will continue to
          closely track the changes in the spot price of a barrel of WTI light, sweet
          crude oil, less USOF’s expenses. The following graph
          demonstrates the correlation between the NAV of USOF and the spot price
          of WTI
          light, sweet crude oil during the last thirty valuation days ending December
          31,
          2006.
 2
 
 An
          investment in the units allows both retail and institutional investors
          to easily
          gain exposure to the oil market in a cost-effective manner. The units also
          provide additional means for diversifying an investor’s investments or hedging
          exposure to changes in oil prices.
 The
          Benchmark Oil Futures Contract will be changed or “rolled” from the near month
          contract to expire to the next month to expire over a four (4) day
          period.
  These
          relationships are illustrated in the following diagram:
 **The
          Price of USOF’s Units Is Expected to Correlate Closely**
 **With
          USOF’S NAV**
  USOF’s
          units are traded on the American Stock Exchange. The price of
 units
          fluctuates in response to USOF’s NAV and the supply and demand
 pressures
          of the Exchange. Because of certain arbitrage opportunities, the
 General
          Partner believes the price of USOF’s units traded on the
 Exchange
          will correlate closely with USOF’s NAV.
   **Changes
          in USOF’s NAV Are Expected to Correlate Closely With**
 **the
          Changes in the Price of the Benchmark Oil**
 **Futures
          Contract**
  The
          General Partner endeavors to invest USOF’s assets as fully as
 possible
          in Oil Futures Contracts and Other Oil Interests so that the
 changes
          in the NAV closely correlate with changes in the price of the
 Benchmark
          Oil Futures Contract.
   **Changes
          in the Price of the Benchmark Oil Futures**
 **Contract
          Are Expected to Correlate Closely With Changes**
 **in
          the Spot Price of WTI Light, Sweet Crude Oil**
  The
          General Partner believes that changes in the price of the Benchmark
 Oil
          Futures Contract will closely correlate with changes in the cash or
 spot
          price of WTI light, sweet crude oil
   3
 The
              General Partner employs a “neutral” investment strategy in order to track
              changes in the spot price of WTI light, sweet crude oil regardless
              of whether
              the price of oil goes up or goes down. USOF’s “neutral” investment strategy is
              designed to permit investors generally to purchase and sell USOF’s units for the
              purpose of investing indirectly in oil in a cost-effective manner,
              and/or to
              permit participants in the oil or other industries to hedge the risk
              of losses
              in their oil-related transactions.
 USOF’s
            total portfolio composition is disclosed each business day that the American
            Stock Exchange is open for trading on USOF’s website at
            http://www.unitedstatesoilfund.com and through the American Stock Exchange’s
            website at http://www.amex.com. The website disclosure of portfolio holdings
            is
            made daily and includes, as applicable, the name and value of each oil
            interest,
            the specific types of Other Oil Interests and characteristics of such
            Other Oil
            Interests, Treasuries, and amount of cash and cash equivalents held in
            USOF’s
            portfolio. USOF’s website is publicly accessible at no charge. USOF’s assets are
            held in segregation pursuant to the Commodity Exchange Act and CFTC
            regulations.
 
 The
              units may be purchased by Authorized
              Purchasers only in blocks of 100,000 units called Creation Baskets.
              The amount
              of the purchase payment for a Creation Basket is equal to the aggregate
              NAV of
              units in the Creation Basket. Similarly, Authorized Purchasers may
              redeem units
              only in blocks of 100,000 units called Redemption Baskets. The amount
              of the
              redemption proceeds for a Redemption Basket is equal to the aggregate
              NAV of
              units in the Redemption Basket. The purchase price for Creation Baskets,
              and the
              redemption price for Redemption Baskets is the actual NAV calculated
              at the end
              of the business day when notice for a purchase or redemption is received
              by
              USOF. The American Stock Exchange publishes an approximate NAV intra-day
              based
              on the prior day’s NAV and the current price of Benchmark Oil Futures Contracts,
              but the basket price is determined based on the actual NAV at the end
              of the
              day
 Units
            may
            also be purchased and sold in smaller increments than a Creation Basket on
            the American Stock Exchange. However, these transactions are effected
            at the bid
            and ask prices established by specialist firm(s). Like any listed security,
            units can be purchased and sold at any time a secondary market is
            open.
 Graph
          A
          and Graph B on the following page illustrate the historical correlation
          between
          the monthly average spot price of WTI light, sweet crude oil and the monthly
          average price of futures contracts for WTI light, sweet crude oil delivered
          to
          Cushing, Oklahoma traded on the New York Mercantile Exchange. In addition,
          Graph
          C illustrates the historical correlation between the Benchmark Oil Futures
          Contract and other fuel-based commodity futures contracts in which USOF
          may
          invest.
 These
            correlations are relevant because the General Partner endeavors to invest
            USOF’s
            assets in Oil Futures Contracts and Other Oil Interests so that the changes
            in
            USOF’s NAV correlate as closely as possible with the changes in the price
            of the
            Benchmark Oil Futures Contract. As noted, the General Partner also believes
            that
            the changes in the price of the Benchmark Oil Futures Contract will closely
            correlate with the changes in the spot price of WTI light, sweet crude
            oil.
            Assuming that the units’ value tracks the Benchmark Oil Futures Contract as
            intended because of the correlations illustrated by the following charts,
            the
            stated objective of USOF for the units’ NAV to reflect the performance of the
            spot price of WTI light, sweet crude oil would be met if the trend reflected
            over the past ten years were to continue. However, there is no guarantee
            that
            such trend will continue. To obtain the monthly average prices presented
            below,
            USOF added the closing prices for every day in each month and then divided
            that
            number by the total number of days in that month.
 
 4
 **GRAPH
          A**
 
  **GRAPH
          B**
  
  5
  **GRAPH
          C**
 
  **What
          is USOF’s Investment Strategy?**
  In
          managing USOF’s assets the General Partner does not use a technical trading
          system that issues buy and sell orders. The General Partner instead employs
          a
          quantitative methodology whereby each time a Creation Basket is purchased,
          the
          General Partner purchases oil interests, such as an Oil Futures Contract
          for WTI
          light, sweet crude oil traded on the New York Mercantile Exchange, that
          have an
          aggregate face amount that approximates the amount of Treasuries and cash
          received upon the issuance of one or more Creation Baskets.
  As
          an
          example, assume that a Creation Basket purchase order is placed on January
          2,
          2007. If one were to assume USOF’s closing NAV per unit for January 2 is $63.76,
          USOF would receive $6,376,000 for the Creation Basket ($63.76 NAV per unit
          times
          100,000 units, and ignoring the Creation Basket fee of $1,000). Assume
          that the
          price of an Oil Futures Contract for WTI light, sweet crude oil on January
          3,
          2007 is $63,770. Because the price of oil reflected in these near month
          futures
          contracts on January 3, 2007 is different (in this case, higher) than the
          price
          of oil reflected in USOF’s NAV calculated as of January 2, 2007 (the day the
          corresponding Creation Basket was sold), USOF cannot invest the entire
          purchase
          amount corresponding to the Creation Basket in futures contracts — i.e., it can
          only invest in 99 Oil Futures Contracts with an aggregate value of $6,313,230
          ($63,770 per contract times 99 contracts). Assuming a margin equal to 10%
          of the value of the Oil Futures Contracts which would require $631,323
          in
          Treasuries to be deposited as margin with the futures commission merchant
          through which the contract was purchased, the remainder of the purchase
          price
          for the Creation Basket, $5,744,677, would remain invested in cash and
          Treasuries as determined by the General Partner from time to time based
          on
          factors such as potential calls for margin or anticipated
          redemptions.
 6
 The
          specific Oil Futures Contracts purchased depend on various factors, including
          a
          judgment by the General Partner as to the appropriate diversification of
          USOF’s
          investments in futures contracts with respect to the month of expiration,
          and
          the prevailing price volatility of particular contracts. While the General
          Partner has made significant investments in New York Mercantile Exchange
          Oil
          Futures Contracts, as USOF reaches certain position limits on
          the New York Mercantile Exchange, or for other reasons, it has also and
          may
          continue to invest in Oil Futures Contracts traded on other exchanges or
          invest
          in other Oil Interests such as contracts in the “over-the-counter”
market.
  The
          General Partner does not anticipate letting its Oil Futures Contracts expire
          and
          taking delivery of the underlying oil. Instead, the General Partner will
          close
          existing positions when it is determined appropriate to do so and reinvest
          the
          proceeds in new Oil Futures Contracts. Positions may also be closed out
          to meet
          orders for Redemption Baskets.
  By
          remaining invested as fully as possible in Oil Futures Contracts or Other
          Oil
          Interests, the General Partner believes that the changes in percentage
          terms in
          USOF’s NAV will continue to closely track the changes in percentage terms
          in the prices of the futures contracts in which USOF invests. The General
          Partner believes that certain arbitrage opportunities result in the price
          of the
          units traded on the American Stock Exchange closely tracking the NAV of
          USOF.
          Additionally, as discussed above, the General Partner has conducted research
          that indicates that oil futures contracts traded on the New York Mercantile
          Exchange have closely tracked the spot price of the underlying oil. Based
          on
          these expected interrelationships, the General Partner believes that the
          changes
          in the price of USOF’s units as traded on the American Stock Exchange will
          continue to closely track the changes in the spot price of WTI light, sweet
          crude oil.
  **What
          are Oil Futures Contracts?**
  Oil
          Futures Contracts are agreements between two parties. One party agrees
          to buy
          oil from the other party at a later date at a price and quantity agreed-upon
          when the contract is made. Oil Futures Contracts are traded on futures
          exchanges, including the New York Mercantile Exchange. Oil Futures Contracts
          trade in units of 1,000 barrels.   The price of futures contracts
          traded on the New York Mercantile Exchange are priced by floor brokers
          and other
          exchange members both through an “open outcry” of offers to purchase or sell the
          contracts and through an electronic, screen-based system that determines
          the
          price by matching electronically offers to purchase and sell.
  Certain
          typical and significant characteristics of Oil Futures Contracts are discussed
          below. Additional risks of investing in Oil Futures Contracts are included
          in
“What are the Risk Factors Involved with an Investment in USOF?”
 *Impact
            of Accountability Levels, Position Limits and Price Fluctuation
            Limits* .
            Oil
            Futures Contracts include typical and significant characteristics. Most
            significantly, the CFTC and U.S. designated contract markets such as
            the New
            York Mercantile Exchange have established accountability levels and position
            limits on the maximum net long or net short Oil Futures Contracts in
            commodity
            interests that any person or group of persons under common trading control
            (other than as a hedge, which an investment in USOF is not) may hold,
            own or
            control. The net position is the difference between an individual or
            firm’s open
            long contracts and open short contracts in any one commodity. In addition,
            most
            U.S. futures exchanges, such as the New York Mercantile Exchange, limit
            the
            price fluctuation for Oil Futures Contracts.
 7
 
 The
              accountability levels for the Benchmark Oil Futures Contract and other
              Oil
              Futures Contracts traded on the New York Mercantile Exchange are not
              a fixed
              ceiling, but rather a threshold above which the New York Mercantile
              Exchange may
              exercise greater scrutiny and control over an investor’s positions. The current
              accountability level for investments at any one time in Oil Futures
              Contracts
              (including investments in the Benchmark Oil Futures Contract) is 20,000
              contracts. If USOF exceeds this accountability level for investments
              in Oil
              Futures Contracts, the New York Mercantile Exchange will monitor USOF’s exposure
              and ask for further information on USOF’s activities including the total size of
              all positions, investment and trading strategy, and the extent of USOF’s
              liquidity resources. If deemed necessary by the New York Mercantile
              Exchange, it
              could also order USOF to reduce its position back to the accountability
              level.
              As of December 31, 2006, USOF held 12,871 Oil Futures Contracts traded
              on the
              New York Mercantile Exchange and 300 Oil Futures Contracts traded on
              the ICE
              Futures.
 If
            the
            New York Mercantile Exchange orders USOF to reduce its position back
            to the
            accountability level, or to an accountability level that the New York
            Mercantile
            Exchange deems appropriate for USOF, such an accountability level may
            impact the
            mix of investments in oil interests made by USOF. To illustrate, assume
            that the
            price of the Benchmark Oil Futures Contract and the unit price of USOF
            are each
            $10, and that the New York Mercantile Exchange has determined that USOF
            may not
            own more than 20,000 contracts in Oil Futures Contracts. In such case,
            USOF
            could invest up to $2 billion of its daily net assets in the Benchmark
            Oil
            Futures Contract (i.e., $10 per contract multiplied by 1,000 (a Benchmark
            Oil
            Futures Contract is a contract for 1,000 barrels of oil multiplied by
            20,000
            contracts)) before reaching the accountability level imposed by the New
            York
            Mercantile Exchange. Once the daily net assets of the portfolio exceed
            $2
            billion in the Benchmark Oil Futures Contract, the portfolio may not
be able to make any further investments
            in the Benchmark Oil
            Futures Contract, depending on whether the New York Mercantile Exchange
            imposes
            limits. If the New York Mercantile Exchange does impose limits at the
            $2 billion
            level (or another level), USOF anticipates that it will invest the majority
            of
            its assets above that level in a mix of other Oil Futures Contracts or
            Other Oil
            Interests.
  In
            addition to accountability levels, the New York Mercantile Exchange imposes
            position limits on contracts held in the last few days of trading in
            the near
            month contract to expire. It is unlikely that USOF will run up against
            such
            position limits because USOF’s investment strategy is to change or "roll" from
            the near month contract to expire to the next month contract over a four-day
            period beginning two weeks from expiration of the contract.
  U.S.
            futures exchanges, including the New York Mercantile Exchange, also limit
            the
            amount of price fluctuation for Oil Futures Contracts. For example, the
            New York
            Mercantile Exchange imposes a $10.00 per barrel ($10,000 per contract)
            price
            fluctuation limit for Oil Futures Contracts. This limit is initially
            based off
            the previous trading day’s settlement price. If any Oil Futures Contract is
            traded, bid, or offered at the limit for five minutes, trading is halted
            for
            five minutes. When trading resumes it begins at the point where the limit
            was
            imposed and the limit is reset to be $10.00 per barrel in either direction
            of
            that point. If another halt were triggered, the market would continue
            to be
            expanded by $10.00 per barrel in either direction after each successive
            five-minute trading halt. There is no maximum price fluctuation limit
            during any
            one trading session.
  USOF
            anticipates that to the extent it invests in Oil Futures Contracts other
            than
            WTI light, sweet crude oil contracts (such as futures contracts for Brent
            crude
            oil, natural gas, heating oil, and gasoline) and Other Oil Interests,
            it will
            invest in various non-exchange-traded derivative contracts to hedge the
            short-term price movements of such Oil Futures Contracts and Other Oil
            Interests
            against the current Benchmark Oil Futures Contract.
 8
 Examples
              of the position and price limits imposed are as follows:
 **Futures
                    Contract**
                
                **Position
                    Accountability**
                  **Levels
                    and Limits**
                
                **Maximum
                    Daily Price Fluctuation**New
                    York Mercantile Exchange WTI Light, Sweet Crude Oil
                
                Any
                    one month/all months: 20,000 net futures, but not to exceed 2,000
                    contracts in the last three days of trading in the spot
                    month.
                
                $10.00
                    per barrel ($10,000 per contract) for all months. If any contract
                    is
                    traded, bid, or offered at the limit for five minutes, trading
                    is halted
                    for five minutes. When trading resumes, the limit is expanded
                    by $10.00
                    per barrel in either direction. If another halt were triggered,
                    the market
                    would continue to be expanded by $10.00 per barrel in either
                    direction
                    after each successive five-minute trading halt. There will be
                    no maximum
                    price fluctuation limits during any one trading
                    session.ICE Brent
                    Crude Futures
                
                There
                    are no position limits.
                
                There
                    is no maximum daily price fluctuation limit.ICE
                    WTI Crude Futures
                
                There
                    are no position limits.
                
                There
                    is no maximum daily price fluctuation
                    limit.
 New
                    York Mercantile Exchange Heating Oil
                
                7,000
                    contracts for all months combined, but not to exceed 1,000 in
                    the last
                    three days of trading in the spot month.
                
                $0.25
                    per gallon ($10,500 per contract) for all months. If any contract
                    is
                    traded, bid, or offered at the limit for five minutes, trading
                    is halted
                    for five minutes. When trading resumes, the limit is expanded
                    by $0.25 per
                    gallon in either direction. If another halt were triggered, the
                    market
                    would continue to be expanded by $0.25 per gallon in either direction
                    after each successive five-minute trading halt. There will be
                    no maximum
                    price fluctuation limits during any one trading
                    session.New
                    York Mercantile Exchange Gasoline
                
                Any
                    one month/all months: 7,000 net futures.
                
                $0.25
                    per gallon ($10,500 per contract) for all months. If any contract
                    is
                    traded, bid, or offered at the limit for five minutes, trading
                    is halted
                    for five minutes. When trading resumes, the limit is expanded
                    by $0.25 per
                    gallon in either direction. If another halt were triggered, the
                    market
                    would continue to be expanded by $0.25 per gallon in either direction
                    after each successive five-minute trading halt. There will be
                    no maximum
                    price fluctuation limits during any one trading
                    session.
 9
 
 *Price
          Volatility*. Despite daily price limits, the price volatility of Oil Futures
          Contracts generally has been historically greater than that for traditional
          securities such as stocks and bonds. Price volatility often is greater
          day-to-day as opposed to intra-day. Oil Futures Contracts tend to be more
          volatile than stocks and bonds because price movements for barrels of oil
          are
          more currently and directly influenced by economic factors for which current
          data is available and are traded by oil futures traders throughout the
          day.
          These economic factors include changes in interest rates; governmental,
          agricultural, trade, fiscal, monetary and exchange control programs and
          policies; weather and climate conditions; changing supply and demand
          relationships; changes in balances of payments and trade; U.S. and international
          rates of inflation; currency devaluations and revaluations; U.S. and
          international political and economic events; and changes in philosophies
          and
          emotions of market participants. Because USOF invests a significant portion
          of
          its assets in Oil Futures Contracts, the assets of USOF, and therefore
          the
          prices of USOF units, may be subject to greater volatility than traditional
          securities.
 *Marking-to-Market
          Futures Positions*. Oil Futures Contracts are marked to market at the end of
          each trading day and the margin required with respect to such contracts
          is
          adjusted accordingly. This process of marking-to-market is designed to
          prevent
          losses from accumulating in any futures account. Therefore, if USOF’s futures
          positions have declined in value, USOF may be required to post additional
          variation margin to cover this decline. Alternatively, if USOF futures
          positions
          have increased in value, this increase will be credited to USOF’s
          account.
  **What
          is the Crude Oil Market and the Petroleum-Based Fuel
          Market?**
  *WTI
          Light, Sweet Crude Oil.*USOF may purchase Oil Futures Contracts traded on
          the New York Mercantile Exchange that are based on WTI light, sweet crude
          oil.
          It may also purchase contracts on other exchanges, including the ICE Futures
          and
          the Singapore Exchange. The contract provides for delivery of several grades
          of
          domestic and internationally traded foreign crudes, and, among other things,
          serves the diverse needs of the physical market.
  Light,
          sweet crudes are preferred by refiners because of their low sulfur content
          and
          relatively high yields of high-value products such as gasoline, diesel
          fuel,
          heating oil, and jet fuel. The price of WTI light, sweet crude oil has
          historically exhibited periods of significant volatility.
  Demand
          for petroleum products by consumers, as well as agricultural, manufacturing
          and
          transportation industries, determines demand for crude oil by refiners.
          Since
          the precursors of product demand are linked to economic activity, crude
          oil
          demand will tend to reflect economic conditions. However, other factors
          such as
          weather also influence product and crude oil demand.
  Crude
          oil
          supply is determined by both economic and political factors. Oil prices
          (along
          with drilling costs, availability of attractive prospects for drilling,
          taxes
          and technology, among other factors) determine exploration and development
          spending, which influence output capacity with a lag. In the short run,
          production decisions by OPEC also affect supply and prices. Oil export
          embargoes
          and the current conflict in Iraq represent other routes through which political
          developments move the market. It is not possible to predict the aggregate
          effect
          of all or any combination of these factors.
  In
          Europe, Brent crude oil is the standard for futures contracts traded on
          the ICE
          Futures, an electronic marketplace for energy trading and price discovery.
          Brent
          crude oil is the price reference for two-thirds of the world’s traded
          oil.
 10
 *Heating
          Oil.*Heating oil, also known as No. 2 fuel oil, accounts for 25% of the
          yield of a barrel of crude oil, the second largest “cut” from oil after
          gasoline. The heating oil futures contract, listed and traded on the New
          York Mercantile Exchange, trades in units of 42,000 gallons (1,000 barrels)
          and
          is based on delivery in the New York harbor, the principal cash market
          center.
          The price of heating oil has historically been volatile.
  *Natural
          Gas.*Natural gas accounts for almost a quarter of U.S. energy consumption.
          The natural gas futures contract, listed and traded on the New York Mercantile
          Exchange, trades in units of 10,000 million British thermal units
          (mmBtu) and is based on delivery at the Henry Hub in Louisiana, the nexus
          of 16 intra- and interstate natural gas pipeline systems that draw supplies
          from
          the region’s prolific gas deposits. The pipelines serve markets throughout the
          U.S. East Coast, the Gulf Coast, the Midwest, and up to the Canadian border.
          The
          price of natural gas has historically been volatile.
  *Gasoline.*Gasoline is the largest single volume refined product sold in the
          U.S. and
          accounts for almost half of national oil consumption. The gasoline futures
          contract, listed and traded on the New York Mercantile Exchange, trades
          in units
          of 42,000 gallons (1,000 barrels) and is based on delivery at petroleum
          products
          terminals in the New York harbor, the major East Coast trading center for
          imports and domestic shipments from refineries in the New York harbor area
          or
          from the Gulf Coast refining centers. The price of gasoline has historically
          been volatile.
  **Why
          Does USOF Purchase and Sell Oil Futures Contracts?**
  USOF’s
          investment objective is for changes in percentage terms of the units’ NAV to
          reflect the changes in percentage terms of the spot price of WTI light,
          sweet
          crude oil delivered to Cushing, Oklahoma, less USOF’s expenses. USOF invests
          primarily in Oil Futures Contracts. USOF seeks to have its aggregate NAV
          approximate at all times the aggregate face amount of the Oil Futures
          Contracts (or Other Oil Interests) USOF holds.
  Other
          than investing in Oil Futures Contracts and Other Oil Interests, USOF only
          invests in assets to support these investments in oil interests. At any
          given
          time, a significant majority of USOF’s investments will be in Treasuries that
          serve as segregated assets supporting USOF’s positions in Oil Futures Contracts
          and Other Oil Interests. For example, the purchase of an Oil Futures Contract
          with a stated value of $10 million would not require USOF to pay $10 million
          upon entering into the contract; rather, only a margin deposit, generally
          of
          5%-10% of the stated value of the Oil Futures Contract, would be required.
          To
          secure its Oil Futures Contract obligations, USOF would then deposit the
          required margin with the futures commission merchant and hold, through
          its
          Custodian, Treasuries, cash and cash equivalents in an amount equal to
          the balance of the current market value of the contract, which at the contract’s
          inception would be $10 million minus the amount of the deposit, or $9.5
          million
          (assuming a 5% margin).
  As
          a
          result of the foregoing, typically only 5% to 10% of USOF’s assets are held as
          margin in segregated accounts with a futures commission merchant. In addition
          to
          the Treasuries it posts with the futures commission merchant for the Oil
          Futures
          Contracts it owns, USOF holds through the Custodian, Treasuries, cash and
          cash equivalents that can be posted as margin or as collateral to support
          its
          over-the-counter contracts. USOF earns interest income from the Treasuries,
          cash and
          cash
          equivalents that it purchases, and on the cash it holds through the Custodian.
          It anticipates that the earned interest income will increase the NAV and
          limited
          partners’ capital contribution accounts. USOF reinvests the earned interest
          income, holds it in cash, or uses it to pay its expenses. If USOF reinvests
          the
          earned interest income, it will make investments that are consistent with
          its
          investment objectives.
 11
 **What
          is the Flow of Units?**
  **What
          are the Trading Policies of USOF?**
  ***Liquidity***
  USOF
          invests only in Oil Futures Contracts and Other Oil Interests that are
          traded in
          sufficient volume to permit, in the opinion of the General Partner, ease
          of
          taking and liquidating positions in these financial interests.
  ***Spot
          Commodities***
  While
          the
          oil contracts traded on the New York Mercantile Exchange can be physically
          settled, USOF does not intend to take or make physical delivery. USOF may
          from
          time to time trade in Other Oil Interests including contracts based on the
          spot price of oil.
 12
 ***Leverage***
  While
          USOF’s historical ratio of margin to total assets has generally ranged from
          0% to 5%, the General Partner endeavors to have the value of USOF’s Treasuries,
          cash and cash equivalents, whether held by USOF or posted as margin or
          collateral at all times, approximate the aggregate face value of USOF's
          obligations under its Oil Futures Contracts and Other Oil
          Interests.
  ***Borrowings***
  Borrowings
          are not be used by USOF, unless USOF is required to borrow money in the
          event of
          physical delivery, if USOF trades in cash commodities, or for short-term
          needs
          created by unexpected redemptions. USOF expects to have the value of its
          Treasuries, cash or cash equivalents whether held by USOF or posted as
          margin or
          collateral at all times approximate the aggregate face value of its obligations
          under its Oil Futures Contracts and Other Oil Interests. USOF has not
          established and does not plan to establish credit lines.
  ***Pyramiding***
  USOF
          has
          not and will not employ the technique, commonly known as pyramiding, in
          which
          the speculator uses unrealized profits on existing positions as variation
          margin
          for the purchase or sale of additional positions in the same or another
          commodity interest.
  **Who
          are the Service Providers?**
  Brown
          Brothers Harriman & Co. is the registrar and transfer agent for the units.
          Brown Brothers Harriman & Co. is also the custodian for USOF. In this
          capacity, Brown Brothers Harriman & Co. holds USOF’s cash and Treasuries
          pursuant to a custodial agreement. In addition, Brown Brothers Harriman
&
Co. performs certain administrative and accounting services for USOF and
          prepares certain Securities and Exchange Commission ("SEC") and CFTC reports
          on
          behalf of USOF. The General Partner pays Brown Brothers Harriman & Co.’s
          fees for these services.
  USOF
          also
          employs ALPS Distributors, Inc. as a Marketing Agent. The General Partner
          pays
          ALPS Distributors, Inc.’s marketing fee of $425,000 per annum plus an
          incentive fee as follows: 0.0% on USOF’s assets from $0-500 million; .04% on
          USOF’s assets from $500 million-$4 billion; .03% on USOF’s assets in excess of
          $4 billion; provided, however, that in no event may the aggregate compensation
          paid to the Marketing Agent and any affiliate of the General Partner for
          distribution-related services in connection with the offering of Units
          exceed
          ten percent (10%) of the gross proceeds of the offering.
  UBS
          Securities LLC (“UBS Securities”) is USOF’s futures commission merchant. USOF
          and UBS Securities have entered into an Institutional Futures Client Account
          Agreement. This Agreement requires UBS Securities to provide services to
          USOF in
          connection with the purchase and sale of oil interests that may be purchased
          or
          sold by or through UBS Securities for USOF’s account. USOF pays the fees of UBS
          Securities.
  UBS
          Securities’ principal business address is 677 Washington Blvd, Stamford, CT
          06901. UBS Securities is a futures clearing broker for USOF. UBS Securities
          is
          registered in the U.S. with the National Association of Securities Dealers
          ("NASD") as a broker-dealer and with the CFTC as a futures commission merchant.
          UBS Securities is a member of various U.S. futures and securities
          exchanges.
  UBS
          Securities was involved in the 2003 Global Research Analyst Settlement.
          This
          settlement is part of the global settlement that UBS Securities and nine
          other
          firms have reached with the SEC, NASD, New York Stock Exchange and various
          state
          regulators. As part of the settlement, UBS Securities has agreed to pay
          $80,000,000 divided among retrospective relief, for procurement of independent
          research and for investor education. UBS Securities has also undertaken
          to adopt
          enhanced policies and procedures reasonably designed to address potential
          conflicts of interest arising from research practices.
 13
 Further,
          UBS Securities, like most large, full service investment banks and
          broker-dealers, receives inquiries and is sometimes involved in investigations
          by the SEC, New York Stock Exchange and various other regulatory organizations
          and government agencies. UBS Securities fully cooperates with the authorities
          in
          all such requests. UBS Securities regularly reports to the SEC on Form
          B-D
          investigations that result in orders. These reports are publicly
          available.
  UBS
          Securities acts only as clearing broker for USOF and as such is paid commissions
          for executing and clearing trades on behalf of USOF. UBS Securities neither
          acts
          in any supervisory capacity with respect to the General Partner nor participates
          in the management of the General Partner or USOF.
  Currently,
          the General Partner does not employ commodities trading advisors. If, in
          the
          future, the General Partner does employ commodities trading advisors, it
          will
          choose each advisor based on arms-length negotiations and will consider
          the
          advisor’s experience, fees, and reputation.
 ***Fees
          and Compensation Arrangements with the General Partner and Non-Affiliated
          Service Providers****
  
 **Service
                    Provider**
                
                **Compensation
                    Paid by the General Partner**Brown
                    Brothers Harriman & Co., Custodian, Administrator and Transfer
                    Agent
                
                A
                    $50,000 annual fee for its transfer agency services; and for
                    its custody, fund accounting and fund administration services the
                    greater of a minimum amount of $250,000 annually or an asset
                    charge of (a)
                    0.06% for the first $500 million of USOF's net assets, (b) 0.0465%
                    for
                    USOF's net assets greater than $500 million but less than $1
                    billion, and
                    (c) 0.035% of USOF's net assets that exceed $1
                    billion.ALPS
                    Distributors, Inc., Marketing Agent
                
                $425,000
                    per annum plus an incentive fee as follows: 0.0% on USOF’s assets from
                    $0-500 million; .04% on USOF’s assets from $500 million-$4 billion; .03%
                    on USOF’s assets in excess of $4
                    billion.
 ——————
 * The
          General Partner pays this compensation.
  ***Fees
            and Compensation Arrangements with USOF and Non-Affiliated Service
            Providers*****
 
 **Service
                      Provider**
                  
                  **Compensation
                      Paid by USOF**
                  
                  **Fees
                      paid during 2006**UBS
                      Securities LLC, Futures Commission Merchant
                  
                  
                  Approximately
                      $3.50 per buy or sell
                  
                  $
                  478,713Non-Affiliated
                      Brokers
                  
                  
                  Approximately
                      0.16%of assets
                  
                  $
                  0
 ——————
 ** USOF
            pays
            this compensation.
 14
 ***New
            York Mercantile Exchange Licensing Fee*** *
 
 **Assets**
                  
                  **Management
                      Fee**
                  **Fees
                      paid during 2006**First
                      $1,000,000,000
                  
                  0.04%
                      of NAV
                  N/AAfter
                      the first $1,000,000,000
                  
                  0.02%
                      of NAV
                  N/A
  ***
            The
            General Partner is continuing negotiations with the New York Mercantile
            Exchange.  As a result, licensing fees in the amount of $22,198 have
            been accrued but not paid for 2006.
  Assets
            of
            USOF are aggregated with other funds formed by the General Partner, including
            USNG. USOF pays this fee.
  Fees
            are
            to be calculated on a daily basis (accrued at 1/365 of the applicable
            percentage
            of NAV on that day) and to be paid on a quarterly basis.
  **Form
            of Units**
  ***Registered
            Form*** .
            Units
            are issued in registered form in accordance with the LP Agreement. The
            Administrator has been appointed registrar and transfer agent for the
            purpose of
            transferring units in certificated form. The Administrator keeps a record
            of all
            holders of the units in the registry (“Register”). The General Partner
            recognizes transfers of units in certificated form only if done in accordance
            with the LP Agreement. The beneficial interests in such units are held
            in
            book-entry form through participants and/or accountholders in the Depository
            Trust Company ("DTC").
  ***Book
            Entry*** .
            Individual certificates are not issued for the units. Instead, units
            are
            represented by one or more global certificates, which are deposited by
            the
            Administrator with DTC and registered in the name of Cede & Co., as nominee
            for DTC. The global certificates evidence all of the units outstanding
            at any
            time. Unitholders are limited to (1) participants in DTC such as banks,
            brokers, dealers and trust companies ("DTC Participants"), (2) those who
            maintain, either directly or indirectly, a custodial relationship with
            a DTC
            Participant ("Indirect Participants"), and (3) those banks, brokers,
            dealers, trust companies and others who hold interests in the units through
            DTC
            Participants or Indirect Participants, in each case who satisfy the requirements
            for transfers of units. DTC participants acting on behalf of investors
            holding
            units through such participants’ accounts in DTC will follow the delivery
            practice applicable to securities eligible for DTC’s Same-Day Funds Settlement
            System. Units are credited to DTC Participants’ securities accounts following
            confirmation of receipt of payment.
  ***DTC*** .
            DTC is
            a limited purpose trust company organized under the laws of the State
            of New
            York and is a member of the Federal Reserve System, a “clearing corporation”
within the meaning of the New York Uniform Commercial Code and a “clearing
            agency” registered pursuant to the provisions of Section 17A of the Securities
            Exchange Act of 1934, as amended (“Exchange Act”). DTC holds securities for DTC
            Participants and facilitates the clearance and settlement of transaction
            between
            DTC Participants through electronic book-entry changes in accounts of
            DTC
            Participants.
 15
 **Transfer
            of Units**
  ***Transfers
            of Units Only Through DTC***. The units are only transferable through
            the book-entry system of DTC. Limited partners who are not DTC Participants
            may
            transfer their units through DTC by instructing the DTC Participant holding
            their units (or by instructing the Indirect Participant or other entity
            through
            which their units are held) to transfer the units. Transfers are made
            in
            accordance with standard securities industry practice.
  Transfers
            of interests in units with DTC will be made in accordance with the usual
            rules
            and operating procedures of DTC and the nature of the transfer. DTC has
            established procedures to facilitate transfers among the participants
            and/or
            accountholders of DTC. Because DTC can only act on behalf of DTC Participants,
            who in turn act on behalf of Indirect Participants, the ability of a
            person or
            entity having an interest in a global certificate to pledge such interest
            to
            persons or entities that do not participate in DTC, or otherwise take
            actions in
            respect of such interest, may be affected by the lack of a definitive
            security
            in respect of such interest.
  DTC
            has
            advised us that it will take any action permitted to be taken by a unitholder
            (including, without limitation, the presentation of a global certificate
            for
            exchange) only at the direction of one or more DTC Participants in whose
            account
            with DTC interests in global certificates are credited and only in respect
            of
            such portion of the aggregate principal amount of the global certificate
            as to
            which such DTC Participant or Participants has or have given such
            direction.
  ***Transfer/Application
            Requirements***. All purchasers of USOF’s units, and potentially any
            purchasers of limited partner interests in the future, who wish to become
            limited partners or other record holders and receive cash distributions,
            if any,
            or have certain other rights, must deliver an executed transfer application
            in
            which the purchaser or transferee must certify that, among other things,
            he, she
            or it agrees to be bound by USOF’s LP Agreement and is eligible to purchase
            USOF’s securities. Each purchaser of units must execute a transfer application
            and certification. The obligation to provide the form of transfer application
            will be imposed on the seller of units or, if a purchase of units is
            made
            through an exchange, the form may be obtained directly through USOF.
            Further,
            the General Partner may request each record holder to furnish certain
            information, including that holder’s nationality, citizenship or other related
            status. A record holder is a unitholder that is, or has applied to be,
            a limited
            partner. An investor who is not a U.S. resident may not be eligible to
            become a
            record holder or one of the USOF’s limited partners if that investor’s ownership
            would subject USOF to the risk of cancellation or forfeiture of any of
            USOF’s
            assets under any federal, state or local law or regulation. If the record
            holder
            fails to furnish the information or if the General Partner determines,
            on the
            basis of the information furnished by the holder in response to the request,
            that such holder is not qualified to become one of USOF’s limited partners, the
            General Partner may be substituted as a holder for the record holder,
            who will
            then be treated as a non-citizen assignee, and USOF will have the right
            to
            redeem those securities held by the record holder.
  A
            transferee’s broker, agent or nominee may complete, execute and deliver a
            transfer application and certification. USOF may, at its discretion,
            treat the
            nominee holder of a unit as the absolute owner. In that case, the beneficial
            holder’s rights are limited solely to those that it has against the nominee
            holder as a result of any agreement between the beneficial owner and
            the nominee
            holder.
  A
            person
            purchasing USOF’s existing units, who does not execute a transfer application
            and certify that the purchaser is eligible to purchase those securities
            acquires
            no rights in those securities other than the right to resell those securities.
            Whether or not a transfer application is received or the consent of the
            General
            Partner obtained, our units will be securities and will be transferable
            according to the laws governing transfers of securities.
 16
 Any
            transfer of units will not be recorded by the transfer agent or recognized
            by
            the General Partner unless a completed transfer application is delivered
            to the
            General Partner or the Administrator. When acquiring units, the transferee
            of
            such units that complete a transfer application will:
  **·** be
            an
            assignee until admitted as a substituted limited partner upon the consent
            and
            sole discretion of the General Partner and the recording of the assignment
            on
            the books and records of the partnership;
 **·** automatically
            request admission as a substituted limited partner;
 **·** agree
            to
            be bound by the terms and conditions of, and execute, our LP
            Agreement;
 **·** represent
            that such transferee has the capacity and authority to enter into our
            LP
            Agreement;
 **·** grant
            powers of attorney to our General Partner and any liquidator of us;
            and
 **·** make
            the
            consents and waivers contained in our LP Agreement.
  An
            assignee will become a limited partner in respect of the transferred
            units upon
            the consent of our General Partner and the recordation of the name of
            the
            assignee on our books and records. Such consent may be withheld in the
            sole
            discretion of our General Partner.
  If
            consent of the General Partner is withheld such transferee shall be an
            assignee.
            An assignee shall have an interest in the partnership equivalent to that
            of a
            limited partner with respect to allocations and distributions, including,
            without limitation, liquidating distributions, of the partnership. With
            respect
            to voting rights attributable to units that are held by assignees, the
            General
            Partner shall be deemed to be the limited partner with respect thereto
            and
            shall, in exercising the voting rights in respect of such units on any
            matter,
            vote such units at the written direction of the assignee who is the record
            holder of such units. If no such written direction is received, such
            units will
            not be voted. An assignee shall have no other rights of a limited partner.
  Until
            a
            unit has been transferred on our books, we and the transfer agent may
            treat the
            record holder of the unit as the absolute owner for all purposes, except
            as
            otherwise required by law or stock exchange regulations.
  **Withdrawal
            of Limited Partners**
  As
            discussed in the LP Agreement, if the General Partner gives at least
            fifteen
            (15) days’ written notice to a limited partner, then the General Partner may for
            any reason, in its sole discretion, require any such limited partner
            to withdraw
            entirely from the partnership or to withdraw a portion of its partner
            capital
            account. If the General Partner does not give at least fifteen (15) days’
written notice to a limited partner, then it may only require withdrawal
            of all
            or any portion of the capital account of any limited partner in the following
            circumstances: (i) the unitholder made a misrepresentation to the General
            Partner in connection with its purchase of units; or (ii) the limited
            partner’s ownership of units would result in the violation of any law or
            regulations applicable to the partnership or a partner. In these circumstances,
            the General Partner without notice may require the withdrawal at any
            time, or
            retroactively. The limited partner thus designated shall withdraw from
            the
            partnership or withdraw that portion of its partner capital account specified,
            as the case may be, as of the close of business on such date as determined
            by
            the General Partner. The limited partner thus designated shall be deemed
            to have
            withdrawn from the partnership or to have made a partial withdrawal from
            its
            partner capital account, as the case may be, without further action on
            the part
            of the limited partner and the provisions of the LP Agreement shall
            apply.
 17
 ***Calculating
            NAV***
  USOF’s
            NAV is calculated by:
  **·**
                  Taking
                      the current market value of its total
                      assets
 **·**
                  Subtracting
                      any liabilities
  The
            Administrator calculates the NAV of USOF once each trading day. The NAV
            for a
            particular trading day is released after 4:15 p.m. New York time. It
            calculates
            NAV as of the earlier of the close of the New York Stock Exchange or
            4:00 p.m.
            New York time. Trading on the American Stock Exchange typically closes
            at 4:15
            p.m. New York time. USOF uses the New York Mercantile Exchange closing
            price
            (determined at the earlier of the close of that Exchange or 2:30 p.m.
            New York
            time) for the contracts held on the New York Mercantile Exchange, but
            calculates
            or determines the value of all other USOF investments as of the earlier
            of the
            close of the New York Stock Exchange or 4:00 p.m. New York time.
  In
            addition, in order to provide updated information relating to USOF for
            use by
            investors and market professionals, the American Stock Exchange calculates
            and
            disseminates throughout the trading day an updated indicative fund value.
            The
            indicative fund value is calculated by using the prior day’s closing NAV per
            unit of USOF as a base and updating that value throughout the trading
            day to
            reflect changes in the most recently reported trade price for the active
            WTI
            light, sweet Oil Futures Contract on the New York Mercantile Exchange.
            The
            prices reported for the active Oil Futures Contract month are adjusted
            based on
            the prior day’s spread differential between settlement values for that contract
            and the spot month contract. In the event that the spot month contract
            is also
            the active contract, the last sale price for the active contract is not
            adjusted. The indicative fund value unit basis disseminated during American
            Stock Exchange trading hours should not be viewed as an actual real time
            update
            of the NAV, because NAV is calculated only once at the end of each trading
            day.
  The
            indicative fund value is disseminated on a per unit basis every 15 seconds
            during regular American Stock Exchange trading hours of 9:30 a.m. New
            York time
            to 4:15 p.m. New York time. The normal trading hours of the New York
            Mercantile
            Exchange are 10:00 a.m. New York time to 2:30 p.m. New York time. This
            means
            that there is a gap in time at the beginning and the end of each day
            during
            which USOF’s units are traded on the American Stock Exchange, but real-time New
            York Mercantile Exchange trading prices for oil futures contracts traded
            on such
            Exchange are not available. As a result, during those gaps there will
            be no
            update to the indicative fund value.
  The
            American Stock Exchange disseminates the indicative fund value through
            the
            facilities of CTA/CQ High Speed Lines. In addition, the indicative fund
            value is
            published on the American Stock Exchange’s website and is available through
            on-line information services such as Bloomberg and Reuters.
  Dissemination
            of the indicative fund value provides additional information that is
            not
            otherwise available to the public and is useful to investors and market
            professionals in connection with the trading of USOF units on the American
            Stock
            Exchange. Investors and market professionals are able throughout the
            trading day
            to compare the market price of USOF and the indicative fund value. If
            the market
            price of USOF units diverges significantly from the indicative fund value,
            market professionals will have an incentive to execute arbitrage trades.
            For
            example, if USOF appears to be trading at a discount compared to the
            indicative
            fund value, a market professional could buy USOF units on the American
            Stock
            Exchange and sell short oil future contracts. Such arbitrage trades can
            tighten
            the tracking between the market price of USOF and the indicative fund
            value and
            thus can be beneficial to all market participants.
  In
            addition, other Oil Futures Contracts, Other Oil Interests and Treasuries
            held
            by USOF are valued by the Administrator, using rates and points received
            from
            client approved third party vendors (such as Reuters and WM Company)
            and advisor
            quotes. These investments are not included in the indicative value. The
            indicative fund value is based on the prior day’s NAV and moves up and down
            according solely to changes in near month Oil Futures Contracts for WTI
            light,
            sweet oil traded on the New York Mercantile Exchange.
 18
 ***Creation
            and Redemption of Units***
  USOF
            creates and redeems units from time to time, but only in one or more
            Creation
            Baskets or Redemption Baskets. The creation and redemption of baskets
            are only
            made in exchange for delivery to USOF or the distribution by USOF of
            the amount
            of Treasuries and any cash represented by the baskets being created or
            redeemed,
            the amount of which is based on the combined NAV of the number of units
            included
            in the baskets being created or redeemed determined as of 4:00 p.m. New
            York
            time on the day the order to create or redeem baskets is properly
            received.
  Authorized
            Purchasers are the only persons that may place orders to create and redeem
            baskets. Authorized Purchasers must be (1) registered broker-dealers
            or other
            securities market participants, such as banks and other financial institutions,
            that are not required to register as broker-dealers to engage in securities
            transactions as described below, and (2) DTC Participants. To become
            an
            Authorized Purchaser, a person must enter into an Authorized Purchaser
            Agreement
            with the General Partner. The Authorized Purchaser Agreement provides
            the
            procedures for the creation and redemption of baskets and for the delivery
            of
            the Treasuries and any cash required for such creations and redemptions.
            The
            Authorized Purchaser Agreement and the related procedures attached thereto
            may
            be amended by USOF, without the consent of any limited partner or unitholder
            or
            Authorized Purchaser. Authorized Purchasers pay a transaction fee of
            $1,000 to
            USOF for each order they place to create or redeem one or more baskets.
            Authorized Purchasers who make deposits with USOF in exchange for baskets receive
            no fees, commissions or other form of compensation or inducement of any
            kind
            from either USOF or the General Partner, and no such person will have
            any
            obligation or responsibility to the General Partner or USOF to effect
            any sale
            or resale of units. As of December 31, 2006, 9 Authorized Purchasers
            had entered
            into agreements with USOF to purchase Creation Baskets of
            units.
  Each
            Authorized Purchaser is required to be registered as a broker-dealer
            under the
            Exchange Act and is a member in good standing with the NASD, or exempt
            from
            being or otherwise not required to be licensed as a broker-dealer or
            a member of
            NASD, and qualified to act as a broker or dealer in the states or other
            jurisdictions where the nature of its business so requires. Certain Authorized
            Purchasers may also be regulated under federal and state banking laws
            and
            regulations. Each Authorized Purchaser has its own set of rules and procedures,
            internal controls and information barriers as it determines is appropriate
            in
            light of its own regulatory regime.
  Under
            the
            Authorized Purchaser Agreement, the General Partner has agreed to indemnify
            the
            Authorized Purchasers against certain liabilities, including liabilities
            under
            the Securities Act, and to contribute to the payments the Authorized
            Purchasers
            may be required to make in respect of those liabilities.
  The
            following description of the procedures for the creation and redemption
            of
            baskets is only a summary and an investor should refer to the relevant
            provisions of the LP Agreement and the form of Authorized Purchaser Agreement
            for more detail, each of which is attached as an exhibit to this annual
            report
            on Form 10-K.
  ***Creation
            Procedures***
  On
            any
            business day, an Authorized Purchaser may place an order with the Marketing
            Agent to create one or more baskets. For purposes of processing purchase
            and
            redemption orders, a “business day” means any day other than a day when any of
            the American Stock Exchange, the New York Mercantile Exchange or the
            New York
            Stock Exchange is closed for regular trading. Purchase orders must be
            placed by
            12:00 p.m. New York time or the close of regular trading on the American
            Stock
            Exchange, whichever is earlier; except in the case of the initial Authorized
            Purchaser’s or any other Authorized Purchaser’s initial order to purchase one or
            more Creation Baskets on the first day the baskets are to be offered
            and sold,
            when such orders shall be placed by 9:00 a.m. New York time on the day
            agreed to
            by the General Partner and the initial Authorized Purchaser. The day
            on which
            the Marketing Agent receives a valid purchase order is the purchase order
            date.
  By
            placing a purchase order, an Authorized Purchaser agrees to deposit Treasuries
            with USOF, or a combination of Treasuries and cash, as described below.
            Prior to
            the delivery of baskets for a purchase order, the Authorized Purchaser
            must also
            have wired to the Custodian the non-refundable transaction fee due for
            the
            purchase order. Authorized Purchasers may not withdraw a creation
            request.
 19
 ***Redemption
            Procedures***
  The
            procedures by which an Authorized Purchaser can redeem one or more baskets
            mirror the procedures for the creation of baskets. On any business day,
            an
            Authorized Purchaser may place an order with the Marketing Agent to redeem
            one
            or more baskets. Redemption orders must be placed by 12:00 p.m. New York
            time or
            the close of regular trading on the American Stock Exchange, whichever
            is
            earlier. A redemption order so received will be effective on the date
            it is
            received in satisfactory form by the Marketing Agent. The redemption
            procedures
            allow Authorized Purchasers to redeem baskets and do not entitle an individual
            unitholder to redeem any units in an amount less than a basket, or to
            redeem
            baskets other than through an Authorized Purchaser. By placing a redemption
            order, an Authorized Purchaser agrees to deliver the baskets to be redeemed
            through DTC’s book-entry system to USOF not later than 3:00 p.m. New York time
            on the third business day following the effective date of the redemption
            order.
            Prior to the delivery of the redemption distribution for a redemption
            order, the
            Authorized Purchaser must also have wired to USOF’s account at the Custodian the
            non-refundable transaction fee due for the redemption order. Authorized
            Purchasers may not withdraw a redemption request.
  ***Creation
            and Redemption Transaction Fee***
  To
            compensate USOF for its expenses in connection with the creation and
            redemption
            of baskets, an Authorized Purchaser is required to pay a transaction
            fee to USOF
            of $1,000 per order to create or redeem baskets. An order may include
            multiple
            baskets. The transaction fee may be reduced, increased or otherwise changed
            by
            the General Partner. The General Partner shall notify DTC of any change
            in the
            transaction fee and will not implement any increase in the fee for the
            redemption of baskets until 30 days after the date of the
            notice.
  ***Tax
            Responsibility***
  Authorized
            Purchasers are responsible for any transfer tax, sales or use tax, stamp
            tax,
            recording tax, value added tax or similar tax or governmental charge
            applicable
            to the creation or redemption of baskets, regardless of whether or not
            such tax
            or charge is imposed directly on the Authorized Purchaser, and agree
            to
            indemnify the General Partner and USOF if they are required by law to
            pay any
            such tax, together with any applicable penalties, additions to tax or
            interest
            thereon.
  ***Secondary
            Market Transactions***
  As
            noted,
            USOF will create and redeem units from time to time, but only in one
            or more
            Creation Baskets or Redemption Baskets. The creation and redemption of
            baskets
            will only be made in exchange for delivery to USOF or
            the
            distribution by USOF of the amount of Treasuries and cash represented
            by the
            baskets being created or redeemed, the amount of which will be based
            on the
            aggregate NAV of the number of units included in the baskets being created
            or
            redeemed determined on the day the order to create or redeem baskets
            is properly
            received.
 20
 As
            discussed above, Authorized Purchasers are the only persons that may
            place
            orders to create and redeem baskets. Authorized Purchasers must be registered
            broker-dealers or other securities market participants, such as banks
            and other
            financial institutions that are not required to register as broker-dealers
            to
            engage in securities transactions. An Authorized Purchaser is under no
            obligation to create or redeem baskets, and an Authorized Purchaser is
            under no
            obligation to offer to the public units of any baskets it does create.
            Authorized Purchasers that do offer to the public units from the baskets
            they
            create will do so at per-unit offering prices that are expected to reflect,
            among other factors, the trading price of the units on the American Stock
            Exchange, the NAV of USOF at the time the Authorized Purchaser purchased
            the
            Creation Baskets and the NAV of the units at the time of the offer of
            the units
            to the public, the supply of and demand for units at the time of sale,
            and the
            liquidity of the Oil Futures Contract market and the market for Other
            Oil
            Interests. The prices of units offered by Authorized Purchasers are expected
            to
            fall between USOF’s NAV and the trading price of the units on the American Stock
            Exchange at the time of sale. Units initially comprising the same basket
            but
            offered by Authorized Purchasers to the public at different times may
            have
            different offering prices. An order for one or more baskets may be placed
            by an
            Authorized Purchaser on behalf of multiple clients. Authorized Purchasers
            who
            make deposits with USOF in exchange for baskets receive no fees, commissions
            or
            other form of compensation or inducement of any kind from either USOF
            or the
            General Partner, and no such person has any obligation or responsibility
            to the
            General Partner or USOF to effect any sale or resale of units. Units
            are
            expected to trade in the secondary market on the American Stock Exchange.
            Units
            may trade in the secondary market at prices that are lower or higher
            relative to
            their NAV per unit. The amount of the discount or premium in the trading
            price
            relative to the NAV per unit may be influenced by various factors, including
            the
            number of investors who seek to purchase or sell units in the secondary
            market
            and the liquidity of the Oil Futures Contracts market and the market
            for Other
            Oil Interests. While the units trade on the American Stock Exchange until
            4:15
            p.m. New York time, liquidity in the market for Oil Futures Contracts
            and Other
            Oil Interests may be reduced after the close of the New York Mercantile
            Exchange
            at 2:30 p.m. New York time. As a result, during this time, trading spreads,
            and
            the resulting premium or discount, on the units may widen.
 **Prior
          Performance of the General Partner and Affiliates**
  On
          September 8, 2006, the General Partner formed USNG, but since it has not
          begun
          trading there is no prior performance for USNG. USOF’s offering began on April
          10, 2006 and is a continuous offering. As of December 31, 2006, the total
          amount of money raised by USOF from Authorized Purchasers was $1,740,249,722;
          the total number of Authorized Purchasers was 9, the number of baskets
          purchased
          by Authorized Purchasers was 290; and the aggregate amount of units purchased
          was 29 million. For more information on the performance of USOF, see the
          Performance Tables below.
  **PAST
          PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
          RESULTS**
  **Experience
          in Raising and Investing in Funds through
          December 31, 2006**
  Dollar
                    Amount Offered:
                $
                2,708,260,000Dollar
                    Amount Raised:
                $
                1,740,249,722Organizational
                    Expenses*:SEC
                    registration fee**:
                $
                111,362AMEX
                    Listing Fee**:
                $
                5,000Auditor's
                    fees and expenses**:
                $
                44,000Legal
                    fees and expenses**:
                $
                1,151,354Printing
                    expenses:
                $
                240,000Length
                    of Offering:
                
                Continuous
 ——————
 *  
          Amounts are for organizational and offering expenses incurred in connection
          with
          the initial public offering on April 10, 2006.
 ** Paid
          for
          by an affiliate of the General Partner in connection with the initial public
          offering.
 21
 **Performance
          Capsule**
  Name
                    of Commodity Pool:
                
                USOFType
                    of Commodity Pool:
                
                Exchange
                    traded securityInception
                    of Trading:
                
                April
                    10, 2006Aggregate
                    Gross Capital Subscriptions (from inception through
                    December 31, 2006):
                
                $
                1,740,249,722Total
                    Net Assets as of December 31, 2006:
                
                $
                803,949,254
                *Initial
                    NAV Per Unit as of Inception:
                
                $
                67.39NAV
                    per Unit as of December 31, 2006:
                
                $
                51.87Worst
                    Monthly Percentage Draw-down:
                
                
                September
                    2006 (11.71
                %)Worst
                    Peak-to-Valley Draw-down:
                
                
                June
                    2006-December 2006 (25.73
                %)Total
                    Rate of Return Since Inception:
                
                
                (23.03
                %)
 ——————
 * Inclusive
          of transactions recorded on a trade date + 1 basis.
  **PAST
          PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
          RESULTS**
 
 **Month**
                
                **Rates of Return**
                  **For the Year 2006**April
                
                
                3.47
                %May
                
                
                (2.91
                %)June
                
                
                3.16
                %July
                
                
                (0.50
                %)August
                
                
                (6.97
                %)September
                
                
                (11.71
                %)October
                
                
                (8.46
                %)November
                
                
                4.73
                %December
                
                
                (5.21
                %)
 22
 Draw-down:
          Losses experienced by a pool or trading program over a specified period.
          Draw-down is measured on the basis of monthly returns only and does not
          reflect
          intra-month figures.
  Worst
          Monthly Percentage Draw-down: The largest single month loss sustained since
          inception of trading.
  Worst
          Peak-to-Valley Draw-down: The largest percentage decline in the NAV per
          unit
          over the history of a pool or trading program. This need not be a continuous
          decline, but can be a series of positive and negative returns where the
          negative
          returns are larger than the positive returns. Worst Peak-to-Valley Draw-down
          represents the greatest percentage
          decline from any month-end NAV per unit that occurs without such month-end
          NAV
          per unit being equaled or exceeded as of a subsequent
          month-end.
  In
          addition, Nicholas Gerber, the president and CEO of the General Partner,
          ran the
          Marc Stevens Futures Index Fund over 10 years ago. This fund combined commodity
          futures with equity stock index futures. It was a very small private offering,
          which had under $1 million in assets. The Marc Stevens Futures Index Fund
          was a
          commodity pool and Mr. Gerber was the CPO. Ameristock Corporation is an
          affiliate of the General Partner and it is a California-based registered
          investment advisor registered under the Investment Advisors Act of 1940
          that has
          been sponsoring and providing portfolio management services to mutual funds
          since 1995. Ameristock Corporation is the investment adviser to the Ameristock
          Mutual Fund, Inc., a mutual fund registered under the Investment Company
          Act of
          1940 that focuses on large cap U.S. equities that has approximately $600
          million
          in assets.
  **Investments**
  The
          General Partner applies substantially all of USOF’s assets toward trading in Oil
          Futures Contracts and other Oil Interests, Treasuries, cash and cash
          equivalents. The General Partner has sole authority to determine the percentage
          of assets that are:
  **·**
                held
                    on deposit with the futures commission merchant or other
                    custodian,
 **·**
                  used
                      for other investments, and
 **·**
                held
                    in bank accounts to pay current obligations and as
                    reserves.
  The
          General Partner deposits substantially all of USOF’s net assets with the futures
          commission merchant or other custodian for trading. When USOF purchases
          an Oil
          Futures Contract and certain exchange traded Other Oil Interests, USOF
          is
          required to deposit with the selling futures commission merchant on behalf
          of
          the exchange a portion of the value of the contract or other interest as
          security to ensure payment for the obligation under oil interests at maturity.
          This deposit is known as “margin.” USOF invests the remainder of its assets
          equal to the difference between the margin deposited and the face value
          of the
          futures contract in Treasuries, cash and cash equivalents.
  The
          General Partner believes that all entities that hold or trade USOF’s assets are
          based in the United States and are subject to United States
          regulations.
  Approximately
          5% to 10% of USOF’s assets have normally been committed as margin for commodity
          futures contracts. However, from time to time, the percentage of assets
          committed as margin may be substantially more, or less, than such range.
          The
          General Partner invests the balance of USOF’s assets not invested in oil
          interests or held in margin as reserves to be available for changes in
          margin.
          All interest income is used for USOF’s benefit.
  The
          futures commission merchant, a government agency or a commodity exchange
          could
          increase margins applicable to USOF to hold trading positions at any time.
          Moreover, margin is merely a security deposit and has no bearing on the
          profit
          or loss potential for any positions taken.
  USOF’s
          assets are held in segregation pursuant to the Commodity Exchange Act and
          CFTC
          regulations.
 23
 **The
          Commodity Interest Markets**
  ***General***
  The
          Commodity Exchange Act or CEA governs the regulation of commodity interest
          transactions, markets and intermediaries. In December 2000, the CEA was
          amended
          by the Commodity Futures Modernization Act of 2000, or CFMA, which substantially
          revised the regulatory framework governing certain commodity interest
          transactions and the markets on which they trade. The CEA, as amended by
          the
          CFMA, now provides for varying degrees of regulation of commodity interest
          transactions depending upon the variables of the transaction. In general,
          these
          variables include (1) the type of instrument being traded (e.g., contracts
          for
          future delivery, options, swaps or spot contracts), (2) the type of commodity
          underlying the instrument (distinctions are made between instruments based
          on
          agricultural commodities, energy and metals commodities and financial
          commodities), (3) the nature of the parties to the transaction (retail,
          eligible
          contract participant, or eligible commercial entity), (4) whether the
          transaction is entered into on a principal-to-principal or intermediated
          basis,
          (5) the type of market on which the transaction occurs, and (6) whether
          the
          transaction is subject to clearing through a clearing organization. Information
          regarding commodity interest transactions, markets and intermediaries,
          and their
          associated regulatory environment, is provided below.
  ***Futures
          Contracts***
  A
          futures
          contract such as an Oil Futures Contract is a standardized contract traded
          on,
          or subject to the rules of, an exchange that calls for the future delivery
          of a
          specified quantity and type of a commodity at a specified time and place.
          Futures contracts are traded on a wide variety of commodities, including
          agricultural products, bonds, stock indices, interest rates, currencies,
          energy
          and metals. The size and terms of futures contracts on a particular commodity
          are identical and are not subject to any negotiation, other than with respect
          to
          price and the number of contracts traded between the buyer and
          seller.
  The
          contractual obligations of a buyer or seller may generally be satisfied
          by
          taking or making physical delivery of the underlying of commodity or by
          making
          an offsetting sale or purchase of an identical futures contract on the
          same or
          linked exchange before the designated date of delivery. The difference
          between
          the price at which the futures contract is purchased or sold and the price
          paid
          for the offsetting sale or purchase, after allowance for brokerage commissions,
          constitutes the profit or loss to the trader. Some futures contracts, such
          as
          stock index contracts, settle in cash (reflecting the difference between
          the
          contract purchase/sale price and the contract settlement price) rather
          than by
          delivery of the underlying commodity.
  In
          market
          terminology, a trader who purchases a futures contract is long in the market
          and
          a trader who sells a futures contract is short in the market. Before a
          trader
          closes out his long or short position by an offsetting sale or purchase,
          his
          outstanding contracts are known as open trades or open positions. The aggregate
          amount of open positions held by traders in a particular contract is referred
          to
          as the open interest in such contract.
  ***Forward
          Contracts***
  A
          forward
          contract is a contractual obligation to purchase or sell a specified quantity
          of
          a commodity at or before a specified date in the future at a specified
          price
          and, therefore, is economically similar to a futures contract. Unlike futures
          contracts, however, forward contracts are typically traded in the
          over-the-counter markets and are not standardized contracts. Forward contracts
          for a given commodity are generally available for various amounts and maturities
          and are subject to individual negotiation between the parties involved.
          Moreover, generally there is no direct means of offsetting or closing out
          a
          forward contract by taking an offsetting position as one would a futures
          contract on a U.S. exchange. If a trader desires to close out a forward
          contract
          position, he generally will establish an opposite position in the contract
          but
          will settle and recognize the profit or loss on both positions simultaneously
          on
          the delivery date. Thus, unlike in the futures contract market where a
          trader
          who has offset positions will recognize profit or loss immediately, in
          the
          forward market a trader with a position that has been offset at a profit
          will
          generally not receive such profit until the delivery date, and likewise
          a trader
          with a position that has been offset at a loss will generally not have
          to pay
          money until the delivery date. In recent years, however, the terms of forward
          contracts have become more standardized, and in some instances such contracts
          now provide a right of offset or cash settlement as an alternative to making
          or
          taking delivery of the underlying commodity.
 24
 The
            forward markets provide what has typically been a highly liquid market
            for
            foreign exchange trading, and in certain cases the prices quoted for
            foreign
            exchange forward contracts may be more favorable than the prices for
            foreign
            exchange futures contracts traded on U.S. exchanges. The forward markets
            are
            largely unregulated. Forward contracts are, in general, not cleared or
            guaranteed by a third party. Commercial banks participating in trading
            foreign
            exchange forward contracts often do not require margin deposits, but
            rely upon
            internal credit limitations and their judgments regarding the creditworthiness
            of their counterparties. In recent years, however, many over-the-counter
            market
            participants in foreign exchange trading have begun to require that their
            counterparties post margin.
  Further,
          as the result of the CFMA, over-the-counter derivative instruments such
          as
          forward contracts and swap agreements (and options on forwards and physical
          commodities) may begin to be traded on lightly-regulated exchanges or electronic
          trading platforms that may, but are not required to, provide for clearing
          facilities. Exchanges and electronic trading platforms on which over-the-counter
          instruments may be traded and the regulation and criteria for that trading
          are
          more fully described below under “Futures Exchanges and Clearing Organizations.”
Nonetheless, absent a clearing facility, USOF’s trading in foreign exchange and
          other forward contracts is exposed to the creditworthiness of the counterparties
          on the other side of the trade.
  ***Options
          on Futures Contracts***
  Options
          on futures contracts are standardized contracts traded on an exchange.
          An option
          on futures contract gives the buyer of the option the right, but not the
          obligation, to take a position at a specified price (the striking, strike,
          or
          exercise price) in the underlying futures contract or underlying interest.
          The
          buyer of a call option acquires the right, but not the obligation, to purchase
          or take a long position in the underlying interest, and the buyer of a
          put
          option acquires the right, but not the obligation, to sell or take a short
          position in the underlying interest.
  The
          seller, or writer, of an option is obligated to take a position in the
          underlying interest at a specified price opposite to the option buyer if
          the
          option is exercised. Thus, the seller of a call option must stand ready
          to take
          a short position in the underlying interest at the strike price if the
          buyer
          should exercise the option. The seller of a put option, on the other hand,
          must
          stand ready to take a long position in the underlying interest at the strike
          price.
  A
          call
          option is said to be in-the-money if the strike price is below current
          market
          levels and out-of-the-money if the strike price is above current market
          levels.
          Conversely, a put option is said to be in-the-money if the strike price
          is above
          the current market levels and out-of-the-money if the strike price is below
          current market levels.
  Options
          have limited life spans, usually tied to the delivery or settlement date
          of the
          underlying interest. Some options, however, expire significantly in advance
          of
          such date. The purchase price of an option is referred to as its premium,
          which
          consists of its intrinsic value (which is related to the underlying market
          value) plus its time value. As an option nears its expiration date, the
          time
          value shrinks and the market and intrinsic values move into parity. An
          option
          that is out-of-the-money and not offset by the time it expires becomes
          worthless. On certain exchanges, in-the-money options are automatically
          exercised on their expiration date, but on others unexercised options simply
          become worthless after their expiration date.
  Regardless
          of how much the market swings, the most an option buyer can lose is the
          option
          premium. The option buyer deposits his premium with his broker, and the
          money
          goes to the option seller. Option sellers, on the other hand, face risks
          similar
          to participants in the futures markets. For example, since the seller of
          a call
          option is assigned a short futures position if the option is exercised,
          his risk
          is the same as someone who initially sold a futures contract. Because no
          one can
          predict exactly how the market will move, the option seller posts margin
          to
          demonstrate his ability to meet any potential contractual
          obligations.
 25
 ***Options
          on Forward Contracts or Commodities***
  Options
          on forward contracts or commodities operate in a manner similar to options
          on
          futures contracts. An option on a forward contract or commodity gives the
          buyer
          of the option the right, but not the obligation, to take a position at
          a
          specified price in the underlying forward contract or commodity. However,
          similar to forward contracts, options on forward contracts or on commodities
          are
          individually negotiated contracts between counterparties and are typically
          traded in the over-the-counter market. Therefore, options on forward contracts
          and physical commodities possess many of the same characteristics of forward
          contracts with respect to offsetting positions and credit risk that are
          described above.
  ***Swap
          Contracts***
  Swap
          transactions generally involve contracts between two parties to exchange
          a
          stream of payments computed by reference to a notional amount and the price
          of
          the asset that is the subject of the swap. Swap contracts are principally
          traded
          off-exchange, although recently, as a result of regulatory changes enacted
          as
          part of the CFMA, certain swap contracts are now being traded in electronic
          trading facilities and cleared through clearing organizations.
  Swaps
          are
          usually entered into on a net basis, that is, the two payment streams are
          netted
          out in a cash settlement on the payment date or dates specified in the
          agreement, with the parties receiving or paying, as the case may be, only
          the
          net amount of the two payments. Swaps do not generally involve the delivery
          of
          underlying assets or principal. Accordingly, the risk of loss with respect
          to
          swaps is generally limited to the net amount of payments that the party
          is
          contractually obligated to make. In some swap transactions one or both
          parties
          may require collateral deposits from the counterparty to support that
          counterparty’s obligation under the swap agreement. If the counterparty to such
          a swap defaults, the risk of loss consists of the net amount of payments
          that
          the party is contractually entitled to receive less any collateral deposits
          it is holding.
  ***Participants***
  The
          two
          broad classes of persons who trade commodities are hedgors and speculators.
          Hedgors include financial institutions that manage or deal in interest
          rate-sensitive instruments, foreign currencies or stock portfolios, and
          commercial market participants, such as farmers and manufacturers, that
          market
          or process commodities. Hedging is a protective procedure designed to lock
          in
          profits that could otherwise be lost due to an adverse movement in the
          underlying commodity, for example, the adverse price movement between the
          time a
          merchandiser or processor enters into a contract to buy or sell a raw or
          processed commodity at a certain price and the time he must perform the
          contract. In such a case, at the time the hedgor contracts to physically
          sell
          the commodity at a future date he will simultaneously buy a futures or
          forward
          contract for the necessary equivalent quantity of the commodity. At the
          time for
          performance of the contract, the hedgor may accept delivery under his futures
          contract and sell the commodity quantity as required by his physical contract
          or
          he may buy the actual commodity, sell if under the physical contract and
          close
          out his position by making an offsetting sale of a futures
          contract.
  The
          commodity interest markets enable the hedgor to shift the risk of price
          fluctuations. The usual objective of the hedgor is to protect the profit
          that he
          expects to earn from farming, merchandising, or processing operations rather
          than to profit from his trading. However, at times the impetus for a hedge
          transaction may result in part from speculative objectives.
  Unlike
          the hedgor, the speculator generally expects neither to make nor take delivery
          of the underlying commodity. Instead, the speculator risks his capital
          with the
          hope of making profits from price fluctuations in the commodities. The
          speculator is, in effect, the risk bearer who assumes the risks that the
          hedgor
          seeks to avoid. Speculators rarely make or take delivery of the underlying
          commodity; rather they attempt to close out their positions prior to the
          delivery date. Because the speculator may take either a long or short position
          in commodities, it is possible for him to make profits or incur losses
          regardless of whether prices go up or down.
 26
 ***Futures
          Exchanges and Clearing Organizations***
  Futures
          exchanges provide centralized market facilities in which multiple persons
          have
          the ability to execute or trade contracts by accepting bids and offers
          from
          multiple participants. Futures exchanges may provide for execution of trades
          at
          a physical location utilizing trading pits and/or may provide for trading
          to be
          done electronically through computerized matching of bids and offers pursuant
          to
          various algorithms. Members of a particular exchange and the trades executed
          on
          such exchanges are subject to the rules of that exchange. Futures exchanges
          and
          clearing organizations are given reasonable latitude in promulgating rules
          and
          regulations to control and regulate their members. Examples of regulations
          by
          exchanges and clearing organizations include the establishment of initial
          margin
          levels, rules regarding trading practices, contract specifications, speculative
          position limits, daily price fluctuation limits, and execution and clearing
          fees.
  Clearing
          organizations provide services designed to mutualize or transfer the credit
          risk
          arising from the trading of contracts on an exchange or other electronic
          trading
          facility. Once trades made between members of an exchange or electronic
          trading
          facility have been confirmed, the clearing organization becomes substituted
          for
          the clearing member acting on behalf of each buyer and each seller of contracts
          traded on the exchange or trading platform and in effect becomes the other
          party
          to the trade. Thereafter, each clearing member party to the trade looks
          only to
          the clearing
          organization for performance. The clearing organization generally establishes
          some sort of security or guarantee fund to which all clearing members of
          the
          exchange must contribute; this fund acts as an emergency buffer that is
          intended
          to enable the clearing organization to meet its obligations with regard
          to the
          other side of an insolvent clearing member’s contracts. Furthermore, the
          clearing organization requires margin deposits and continuously marks positions
          to market to provide some assurance that its members will be able to fulfill
          their contractual obligations. Thus, a central function of the clearing
          organization is to ensure the integrity of trades, and members effecting
          transactions on an exchange need not concern themselves with the solvency
          of the
          party on the opposite side of the trade; their only remaining concerns
          are the
          respective solvencies of their own customers, their clearing broker and
          the
          clearing organization. The clearing organizations do not deal with customers,
          but only with their member firms and the guarantee of performance for open
          positions provided by the clearing organization does not run to
          customers.
  ***U.S.
          Futures Exchanges***
  Futures
          exchanges in the United States are subject to varying degrees of regulation
          by
          the CFTC based on their designation as one of the following: a designated
          contract market, a derivatives transaction execution facility, an exempt
          board
          of trade or an electronic trading facility.
  A
          designated contract market is the most highly regulated level of futures
          exchange. Designated contract markets may offer products to retail customers
          on
          an unrestricted basis. To be designated as a contract market, the exchange
          must
          demonstrate that it satisfies specified general criteria for designation,
          such
          as having the ability to prevent market manipulation, rules and procedures
          to
          ensure fair and equitable trading, position limits, dispute resolution
          procedures, minimization of conflicts of interest and protection of market
          participants. Among the principal designated contract markets in the United
          States are the Chicago Board of Trade, the Chicago Mercantile Exchange
          and the
          New York Mercantile Exchange. Each of the designated contract markets in
          the
          United States must provide for the clearance and settlement of transactions
          with
          a CFTC-registered derivatives clearing organization.
 27
 A
          derivatives transaction execution facility, or DTEF, is a new type of exchange
          that is subject to fewer regulatory requirements than a designated contract
          market but is subject to both commodity interest and participant limitations.
          DTEFs limit access to eligible traders that qualify as either eligible
          contract
          participants or eligible commercial entities for futures and option contracts
          on
          commodities that have a nearly inexhaustible deliverable supply, are highly
          unlikely to be susceptible to the threat of manipulation, or have no cash
          market, security futures products, and futures and option contracts on
          commodities that the CFTC may determine, on a case-by-case basis, are highly
          unlikely to be susceptible to the threat of manipulation. In addition,
          certain
          commodity interests excluded or exempt from the CEA, such as swaps, etc.
          may be
          traded on a DTEF. There is no requirement that a DTEF use a clearing
          organization, except with respect to trading in security futures contracts,
          in
          which case the clearing organization must be a securities clearing agency.
          However, if futures contracts and options on futures contracts on a DTEF
          are
          cleared, then it must be through a CFTC-registered derivatives clearing
          organization, except that some excluded or exempt commodities traded on
          a DTEF
          may be cleared through a clearing organization other than one registered
          with
          the CFTC.
  An
          exempt
          board of trade is also a newly designated form of exchange. An exempt board
          of
          trade is substantially unregulated, subject only to CFTC anti-fraud and
          anti-manipulation authority. An exempt board of trade is permitted to trade
          futures contracts and options on futures contracts provided that the underlying
          commodity is not a security or securities index and has an inexhaustible
          deliverable supply or no cash market. All traders on an exempt board of
          trade
          must qualify as eligible contract participants. Contracts deemed eligible
          to be
          traded on an exempt board of trade include contracts on interest rates,
          exchange
          rates, currencies, credit risks or measures, debt instruments, measures
          of
          inflation, or other macroeconomic indices or measures. There is no requirement
          that an exempt board of trade use a clearing organization. However, if
          contracts
          on an exempt board of trade are cleared, then it must be through a
          CFTC-registered derivatives clearing organization. A board of trade electing
          to
          operate as an exempt board of trade must file a written notification with
          the
          CFTC.
  An
          electronic trading facility is a new form of exchange that operates by
          means of
          an electronic or telecommunications network and maintains an automated
          audit
          trail of bids, offers, and the matching of orders or the execution of
          transactions on the electronic trading facility. The CEA does not apply
          to, and
          the CFTC has no jurisdiction over, transactions on an electronic trading
          facility in certain excluded commodities that are entered into between
          principals that qualify as eligible contract participants, subject only
          to CFTC
          anti-fraud and anti- manipulation
          authority. In general, excluded commodities include interest rates, currencies,
          securities, securities indices or other financial, economic or commercial
          indices or measures.
  The
          General Partner intends to monitor the development of and opportunities
          and
          risks presented by the new less-regulated exchanges and exempt boards and
          may,
          in the future, allocate a percentage of USOF’s assets to trading in products on
          these exchanges. Provided USOF maintains assets exceeding $5 million, USOF
          would
          qualify as an eligible contract participant and thus would be able to trade
          on
          such exchanges.
  ***Non-U.S.
          Futures Exchanges***
  Non-U.S.
          futures exchanges differ in certain respects from their U.S. counterparts.
          Importantly, non-U.S. futures exchanges are not subject to regulation by
          the
          CFTC, but rather are regulated by their home country regulator. In contrast
          to
          U.S. designated contract markets, some non-U.S. exchanges are principals’
markets, where trades remain the liability of the traders involved, and
          the
          exchange or an affiliated clearing organization, if any, does not become
          substituted for any party. Due to the absence of a clearing system, such
          exchanges are significantly more susceptible to disruptions. Further,
          participants in such markets must often satisfy themselves as to the individual
          creditworthiness of each entity with which they enter into a trade. Trading
          on
          non-U.S. exchanges is often in the currency of the exchange’s home jurisdiction.
          Consequently, USOF is subject to the additional risk of fluctuations in
          the
          exchange rate between such currencies and U.S. dollars and the possibility
          that
          exchange controls could be imposed in the future. Trading on non-U.S. exchanges
          may differ from trading on U.S. exchanges in a variety of ways and, accordingly,
          may subject USOF to additional risks.
 28
 ***Speculative
          Position Limits***
  The
          CFTC
          and U.S. designated contract markets have established accountability levels
          and
          position limits on the maximum net long or net short futures contracts in
          commodity interests that any person or group of persons under common
          trading control (other than a hedgor, which USOF is not) may hold, own
          or
          control. Among the purposes of accountability levels and position limits
          is to
          prevent a corner or squeeze on a market or undue influence on prices by
          any
          single trader or group of traders. The position limits currently established
          by
          the CFTC apply to certain agricultural commodity interests, such as grains
          (oats, barley, and flaxseed), soybeans, corn, wheat, cotton, eggs, rye,
          and
          potatoes, but not to interests in energy products. In addition, U.S. exchanges
          may set accountability levels and position limits for all commodity interests
          traded on that exchange. For example, the current accountability level
          for
          investments at any one time in Oil Futures Contracts (including investments
          in
          the Benchmark Oil Futures Contract) on the New York Mercantile Exchange
          is
          20,000 contracts. The New York Mercantile Exchange also imposes position
          limits
          on contracts held in the last few days of trading in the near month contract
          to
          expire. Certain exchanges or clearing organizations also set limits on
          the total
          net positions that may be held by a clearing broker. In general, no position
          limits are in effect in forward or other over-the-counter contract trading
          or in
          trading on non-U.S. futures exchanges, although the principals with which
          USOF
          and the clearing brokers may trade in such markets may impose such limits
          as a
          matter of credit policy. For purposes of determining accountability levels
          and
          position limits USOF’s commodity interest positions will not be attributable to
          investors in their own commodity interest trading.
  ***Daily
          Price Limits***
  Most
          U.S.
          futures exchanges (but generally not non-U.S. exchanges) may limit the
          amount of
          fluctuation in some futures contract or options on a futures contract prices
          during a single trading day by regulations. These regulations specify what
          are
          referred to as daily price fluctuation limits or more commonly, daily limits.
          The daily limits establish the maximum amount that the price of a futures
          or
          options on futures contract may vary either up or down from the previous
          day’s
          settlement price. Once the daily limit has been reached in a particular
          futures
          or options on futures contract, no trades may be made at a price beyond
          the
          limit. Positions in the futures or options contract may then be taken or
          liquidated, if at all, only at inordinate expense or if traders are willing
          to
          effect trades at or within the limit during the period for trading on such
          day.
          Because the daily limit rule governs price movement only for a particular
          trading day, it does not limit losses and may in fact substantially increase
          losses because it may prevent the liquidation of unfavorable positions.
          Futures
          contract prices have occasionally moved the daily limit for several consecutive
          trading days, thus preventing prompt liquidation of positions and subjecting
          the
          trader to substantial losses for those days. The concept of daily price
          limits
          is not relevant to over-the-counter contracts, including forwards and swaps,
          and
          thus such limits are not imposed by banks and others who deal in those
          markets.
  In
          contrast, the New York Mercantile Exchange does not impose daily limits
          but
          rather limits the amount of price fluctuation for Oil Futures Contracts.
          For
          example, the New York Mercantile Exchange imposes a $10.00 per barrel
          ($10,000 per contract) price fluctuation limit for Oil Futures Contracts.
          This
          limit is initially based off the previous trading day’s settlement price. If any
          Oil Futures Contract is traded, bid, or offered at the limit for five minutes,
          trading is halted for five minutes. When trading resumes it begins at the
          point
          where the limit was imposed and the limit is reset to be $10.00 per barrel
          in
          either direction of that point. If another halt were triggered, the market
          would
          continue to be expanded by $10.00 per barrel in either direction after
          each
          successive five-minute trading halt. There is no maximum price fluctuation
          limits during any one trading session.
  ***Commodity
          Prices***
  Commodity
          prices are volatile and, although ultimately determined by the interaction
          of
          supply and demand, are subject to many other influences, including the
          psychology of the marketplace and speculative assessments of future world
          and
          economic events. Political climate, interest rates, treaties, balance of
          payments, exchange controls and other governmental interventions as well
          as
          numerous other variables affect the commodity markets, and even with
          comparatively complete information it is impossible for any trader to predict
          reliably commodity prices.
 29
 ***Regulation***
  Futures
          exchanges in the United States are subject to varying degrees of regulation
          under the CEA depending on whether such exchange is a designated contract
          market, DTEF, exempt board of trade or electronic trading facility. Derivatives
          clearing organizations are also subject to the CEA and CFTC regulation.
          The CFTC
          is the governmental agency charged with responsibility for regulation of
          futures
          exchanges and commodity interest trading conducted on those exchanges.
          The
          CFTC’s function is to implement the CEA’s objectives of preventing price
          manipulation and excessive speculation and promoting orderly and efficient
          commodity interest markets. In addition, the various exchanges and clearing
          organizations themselves exercise regulatory and supervisory authority
          over
          their member firms.
  The
          CFTC
          possesses exclusive jurisdiction to regulate the activities of commodity
          pool
          operators and commodity trading advisors and has adopted regulations with
          respect to the activities of those persons and/or entities. Under the CEA,
          a
          registered commodity pool operator, such as the General Partner, is required
          to
          make annual filings with the CFTC describing its organization, capital
          structure, management and controlling persons. In addition, the CEA authorizes
          the CFTC to require and review books and records of, and documents prepared
          by,
          registered commodity pool operators. Pursuant to this authority, the CFTC
          requires commodity pool operators to keep accurate, current and orderly
          records
          for each pool that they operate. The CFTC may suspend the registration
          of a
          commodity pool operator (1) if the CFTC finds that the operator’s trading
          practices tend to disrupt orderly market conditions, (2) if any controlling
          person of the operator is subject to an order of the CFTC denying such
          person
          trading privileges on any exchange, and (3) in certain other circumstances.
          Suspension, restriction or termination of the General Partner’s registration as
          a commodity pool operator would prevent it, until that registration were
          to be
          reinstated, from managing USOF, and might result in the termination of
          USOF.
          USOF itself is not required to be registered with the CFTC in any
          capacity.
  The
          CEA
          gives the CFTC similar authority with respect to the activities of commodity
          trading advisors. If a trading advisor’s commodity trading advisor registration
          were to be terminated, restricted or suspended, the trading advisor would
          be
          unable, until the registration were to be reinstated, to render trading
          advice
          to USOF.
  The
          CEA
          requires all futures commission merchants, such as USOF’s clearing brokers, to
          meet and maintain specified fitness and financial requirements, to segregate
          customer funds from proprietary funds and account separately for all customers’
funds and positions, and to maintain specified books and records open to
          inspection by the staff of the CFTC. The CFTC has similar authority over
          introducing brokers, or persons who solicit or accept orders for commodity
          interest trades but who do not accept margin deposits for the execution
          of
          trades. The CEA authorizes the CFTC to regulate trading by futures commission
          merchants and by their officers and directors, permits the CFTC to require
          action by exchanges in the event of market emergencies, and establishes
          an
          administrative procedure under which customers may institute complaints
          for
          damages arising from alleged violations of the CEA. The CEA also gives
          the
          states powers to enforce its provisions and the regulations of the
          CFTC.
  USOF’s
          investors are afforded prescribed rights for reparations under the CEA.
          Investors may also be able to maintain a private right of action for violations
          of the CEA. The CFTC has adopted rules implementing the reparation provisions
          of
          the CEA, which provide that any person may file a complaint for a reparations
          award with the
          CFTC
          for violation of the CEA against a floor broker or a futures commission
          merchant, introducing broker, commodity trading advisor, commodity pool
          operator, and their respective associated persons.
  Pursuant
          to authority in the CEA, the NFA has been formed and registered with the
          CFTC as
          a registered futures association. At the present time, the NFA is the only
          self-regulatory organization for commodity interest professionals, other
          than
          futures exchanges. The CFTC has delegated to the NFA responsibility for
          the
          registration of commodity trading advisors, commodity pool operators, futures
          commission merchants, introducing brokers, and their respective associated
          persons and floor brokers. The General Partner, each trading advisor, the
          selling agents and the clearing brokers are members of the NFA. As such,
          they
          are subject to NFA standards relating to fair trade practices, financial
          condition and consumer protection. USOF itself is not required to become
          a
          member of the NFA. As the self-regulatory body of the commodity interest
          industry, the NFA promulgates rules governing the conduct of professionals
          and
          disciplines those professionals that do not comply with these rules. The
          NFA
          also arbitrates disputes between members and their customers and conducts
          registration and fitness screening of applicants for membership and audits
          of
          its existing members.
 30
 The
          regulations of the CFTC and the NFA prohibit any representation by a person
          registered with the CFTC or by any member of the NFA, that registration
          with the
          CFTC, or membership in the NFA, in any respect indicates that the CFTC
          or the
          NFA, as the case may be, has approved or endorsed that person or that person’s
          trading program or objectives. The registrations and memberships of the
          parties
          described in this summary must not be considered as constituting any such
          approval or endorsement. Likewise, no futures exchange has given or will
          give
          any similar approval or endorsement.
  The
          regulation of commodity interest trading in the United States and other
          countries is an evolving area of the law. The various statements made in
          this
          summary are subject to modification by legislative action and changes in
          the
          rules and regulations of the CFTC, the NFA, the futures exchanges, clearing
          organizations and other regulatory bodies.
  The
          function of the CFTC is to implement the objectives of the CEA of preventing
          price manipulation and other disruptions to market integrity, avoiding
          systemic
          risk, preventing fraud and promoting innovation, competition and financial
          integrity of transactions. As mentioned above, this regulation, among other
          things, provides that the trading of commodity interest contracts generally
          must
          be upon exchanges designated as contract markets or DTEFs and that all
          trading
          on those exchanges must be done by or through exchange members. Under the
          CFMA,
          commodity interest trading in some commodities between sophisticated persons
          may
          be traded on a trading facility not regulated by the CFTC. As a general
          matter,
          trading in spot contracts, forward contracts, options on forward contracts
          or
          commodities, or swap contracts between eligible contract participants is
          not
          within the jurisdiction of the CFTC and may therefore be effectively
          unregulated. The trading advisors may engage in those transactions on behalf
          of
          USOF in reliance on this exclusion from regulation.
  In
          general, the CFTC does not regulate the interbank and forward foreign currency
          markets with respect to transactions in contracts between certain sophisticated
          counterparties such as USOF or between certain regulated institutions and
          retail
          investors. Although U.S. banks are regulated in various ways by the Federal
          Reserve Board, the Comptroller of the Currency and other U.S. federal and
          state
          banking officials, banking authorities do not regulate the forward
          markets.
  While
          the
          U.S. government does not currently impose any restrictions on the movements
          of
          currencies, it could choose to do so. The imposition or relaxation of exchange
          controls in various jurisdictions could significantly affect the market
          for that
          and other jurisdictions’ currencies. Trading in the interbank market also
          exposes USOF to a risk of default since failure of a bank with which USOF
          had
          entered into a forward contract would likely result in a default and thus
          possibly substantial losses to USOF.
  The
          CFTC
          is prohibited by statute from regulating trading on non-U.S. futures exchanges
          and markets. The CFTC, however, has adopted regulations relating to the
          marketing of non-U.S. futures contracts in the United States. These regulations
          permit certain contracts traded on non-U.S. exchanges to be offered and
          sold in
          the United States.
  ***Commodity
          Margin***
  Original
          or initial margin is the minimum amount of funds that must be deposited
          by a
          commodity interest trader with the trader’s broker to initiate and maintain an
          open position in futures contracts. Maintenance margin is the amount (generally
          less than the original margin) to which a trader’s account may decline before he
          must deliver additional margin. A margin deposit
          is like a
          cash performance bond. It helps assure the trader’s performance of the futures
          contracts that he or she purchases or sells. Futures contracts are customarily
          bought and sold on initial margin that represents a very small percentage
          (ranging upward from less than 2%) of the aggregate purchase or sales price
          of
          the contract. Because of such low margin requirements, price fluctuations
          occurring in the futures markets may create profits and losses that, in
          relation
          to the amount invested, are greater than are customary in other forms of
          investment or speculation. As discussed below, adverse price changes in
          the
          futures contract may result in margin requirements that greatly exceed
          the
          initial margin. In addition, the amount of margin required in connection
          with a
          particular futures contract is set from time to time by the exchange on
          which
          the contract is traded and may be modified from time to time by the exchange
          during the term of the contract.
 31
 Brokerage
          firms, such as USOF’s clearing brokers, carrying accounts for traders in
          commodity interest contracts may not accept lower, and generally require
          higher,
          amounts of margin as a matter of policy to further protect themselves.
          The
          clearing brokers require USOF to make margin deposits equal to exchange
          minimum
          levels for all commodity interest contracts. This requirement may be altered
          from time to time in the clearing brokers’ discretion.
  Trading
          in the over-the-counter markets where no clearing facility is provided
          generally
          does not require margin but generally does require the extension of credit
          between counterparties.
  When
          a
          trader purchases an option, there is no margin requirement; however, the
          option
          premium must be paid in full. When a trader sells an option, on the other
          hand,
          he or she is required to deposit margin in an amount determined by the
          margin
          requirements established for the underlying interest and, in addition,
          an amount
          substantially equal to the current premium for the option. The margin
          requirements imposed on the selling of options, although adjusted to reflect
          the
          probability that out-of-the-money options will not be exercised, can in
          fact be
          higher than those imposed in dealing in the futures markets directly.
          Complicated margin requirements apply to spreads and conversions, which
          are
          complex trading strategies in which a trader acquires a mixture of options
          positions and positions in the underlying interest.
  Margin
          requirements are computed each day by a trader’s clearing broker. When the
          market value of a particular open commodity interest position changes to
          a point
          where the margin on deposit does not satisfy maintenance margin requirements,
          a
          margin call is made by the broker. If the margin call is not met within
          a
          reasonable time, the broker may close out the trader’s position. With respect to
          USOF’s trading, USOF (and not its investors personally) is subject to margin
          calls.
  Finally,
          many major U.S. exchanges have passed certain cross margining arrangements
          involving procedures pursuant to which the futures and options positions
          held in
          an account would, in the case of some accounts, be aggregated and margin
          requirements would be assessed on a portfolio basis, measuring the total
          risk of
          the combined positions.


**Item 1A.**
            **Risk
                Factors.**


*The
        risk factors should be read in connection with the other information included
        in
        this annual report on Form 10-K, including Management’s Discussion and Analysis
        of Financial Condition and Results of Operations and USOF’s financial statements
        and the related notes.*
 32
 **Risks
        Associated With Owning Direct or Indirect Interests in Oil**
  ***Investing
        in oil interests subjects USOF to the risks of the crude oil industry and
        this
        could result in large fluctuations in the price of USOF’s
        units.***
  USOF
        is
        subject to the risks and hazards of the crude oil industry because it invests
        in
        oil interests. The risks and hazards that are inherent in the oil industry
        may
        cause the price of oil to widely fluctuate. If USOF’s units accurately track the
        spot price of WTI light, sweet crude oil, then the price of its units may
        also
        fluctuate.
  The
        risks
        of crude oil drilling and production activities include the
        following:
  ·
              no
                  commercially productive crude oil or natural gas reservoirs may
                  be
                  found;
 **·**
              crude
                  oil and natural gas drilling and production activities may be shortened,
                  delayed or canceled;
 **·**
              the
                  ability of an oil producer to develop, produce and market reserves
                  may be
                  limited by:
 **·**  title
        problems,
 · political
        conflicts, including war,
 · weather
        conditions,
 **·**  compliance
        with governmental requirements,
 **·**  refinery
        capacity, and
 · mechanical
        difficulties or shortages or delays in the delivery of drilling rigs and
        other
        equipment;
 **·**
              decisions
                  of the cartel of oil producing countries (*e.g.*,
                  OPEC, the Organization of the Petroleum Exporting Countries), to
                  produce
                  more or less oil;
 **·**
              increases
                  in oil production due to price rises may make it more economical
                  to
                  extract oil from additional sources and may later temper further
                  oil price
                  increases; and
 **·**
              economic
                  activity of users, as certain economies’ oil consumption increases (*e.g.*,
                  China, India) and as economies contract (in a recession or depression),
                  oil demand and prices fall.
  The
        crude
        oil industry experiences numerous operating risks. These operating risks
        include
        the risk of fire, explosions, blow-outs, pipe failure, abnormally pressured
        formations and environmental hazards. Environmental hazards include oil spills,
        natural gas leaks, ruptures and discharges of toxic gases.
 33
 Crude
        oil
        operations also are subject to various U.S. federal, state and local regulations
        that materially affect operations. Matters regulated include discharge permits
        for drilling operations, drilling and abandonment bonds, reports concerning
        operations, the spacing of wells and pooling of properties and taxation.
        At
        various times, regulatory agencies have imposed price controls and limitations
        on production. In order to conserve supplies of crude oil and natural gas,
        these
        agencies have restricted the rates of flow of crude oil and natural gas wells
        below actual production capacity. Federal, state, and local laws regulate
        production, handling, storage, transportation and disposal of crude oil and
        natural gas, by-products from crude oil and natural gas and other substances
        and
        materials produced or used in connection with crude oil and natural gas
        operations.




***The
        price of USOF’s units may be influenced by factors such as the short-term supply
        and demand for oil and the short-term supply and demand for USOF’s units. This
        may cause the units to trade at a price that is above or below USOF’s NAV per
        unit. Accordingly, changes in the price of units may substantially vary from
        the
        changes in the spot price of WTI light, sweet crude oil. If this variation
        occurs, then investors may not be able to effectively use USOF as a way to
        hedge
        against oil-related losses or as a way to indirectly invest in
        oil.***
  While
        it
        is expected that the trading prices of units will fluctuate in accordance
        with
        changes in USOF’s NAV, the prices of units may also be influenced by other
        factors, including the short-term supply and demand for oil and the units.
        There
        is no guarantee that the units will not trade at appreciable discounts from,
        and/or premiums to, USOF’s NAV. This could cause changes in the price of units
        to substantially vary from changes in the spot price of WTI light, sweet
        crude
        oil. This may be harmful to investors because if changes in the price of
        units
        vary substantially from changes in the spot price of WTI light, sweet crude
        oil,
        then investors may not be able to effectively use USOF as a way to hedge
        the
        risk of losses in their oil-related transactions or as a way to indirectly
        invest in oil.
  ***Changes
        in USOF’s NAV may not correlate with changes in the price of the Benchmark Oil
        Futures Contract. If this were to occur, investors may not be able to
        effectively use USOF as a way to hedge against oil-related losses or as a
        way to
        indirectly invest in oil.***
  The
        General Partner endeavors to invest USOF’s assets as fully as possible in
        short-term Oil Futures Contracts and Other Oil Interests so that the changes
        in
        NAV closely correlate with the changes in the price of the Benchmark Oil
        Futures
        Contract. However, changes in USOF’s NAV may not correlate with the changes in
        the price of the Benchmark Oil Futures Contract for several reasons as set
        forth
        below:
  **·**
              USOF
                  (i) may not be able to buy/sell the exact amount of Oil Futures
                  Contracts
                  and Other Oil Interests to have a perfect correlation with NAV;
                  (ii) may
                  not always be able to buy and sell Oil Futures Contracts or Other
                  Oil
                  Interests at the market price; (iii) may not experience a perfect
                  correlation between the spot price of WTI light, sweet crude oil
                  and the
                  underlying investments in Oil Futures Contracts and Other Oil Interests
                  and Treasuries, cash and cash equivalents; and (iv) is required
                  to pay
                  brokerage fees and  the management fee, which will have an effect on
                  the correlation.
  **·**
              Short-term
                  supply and demand for WTI light, sweet crude oil may cause the
                  market
                  price of the changes in the Benchmark Oil Futures Contract to vary
                  from
                  changes in USOF’s NAV if USOF has fully invested in Oil Futures Contracts
                  that do not reflect such supply and demand and it is unable to
                  replace
                  such contracts with Oil Futures Contracts that do reflect such
                  supply and
                  demand. In addition, there are also technical differences between
                  the two
                  markets, e.g., one is a physical market while the other is a futures
                  market traded on exchanges, that may cause variations between the
                  spot
                  price of oil and the prices of related futures
                  contracts.
  **·**
              USOF
                  plans to buy only as many Oil Futures Contracts and Other Oil Interests
                  that it can to get the changes in the NAV as close as possible
                  to the
                  price of the changes in Benchmark Oil Futures Contract. The remainder
                  of
                  its assets will be invested in Treasuries, cash and cash equivalents
                  and
                  will be used to satisfy initial margin and additional margin requirements,
                  if any, and to otherwise support its investments in oil interests.
                  Investments in Treasuries, cash and cash equivalents, both directly
                  and as
                  margin, will provide rates of return that will vary from changes
                  in the
                  value of the spot price of WTI light, sweet crude oil and the price
                  of the
                  Benchmark Oil Futures Contract.
 34
 **·**
              In
                  addition, because USOF incurs certain expenses in connection with
                  its
                  investment activities, and holds most of its assets in more liquid
                  short-term securities for margin and other liquidity purposes and
                  for
                  redemptions that may be necessary on an ongoing basis, the General
                  Partner
                  is generally not able to fully invest USOF’s assets in Oil Futures
                  Contracts or Other Oil Interests and there cannot be perfect correlation
                  between changes in USOF’s NAV and the changes in the price of the
                  Benchmark Oil Futures Contract.
  **·**
              As
                  USOF grows, there may be more or less correlation. For example,
                  if USOF
                  only has enough money to buy three Benchmark Oil Futures Contracts
                  and it
                  needs to buy four contracts to track the price of oil then the
                  correlation
                  will be lower, but if it buys 20,000 Benchmark Oil Futures Contracts
                  and
                  it needs to buy 20,001 contracts then the correlation will be higher.
                  At
                  certain asset levels, USOF may be limited in its ability to purchase
                  the
                  Benchmark Oil Futures Contract or other Oil Futures Contracts due
                  to
                  accountability levels imposed by the relevant exchanges. To the
                  extent
                  that USOF invests in these other Oil Futures Contracts or Other
                  Oil
                  Interests, the correlation with the Benchmark Oil Futures Contracts
                  may be
                  lower. If USOF is required to invest in other Oil Futures Contracts
                  and
                  Other Oil Interests that are less correlatedwith the Benchmark Oil Futures Contract, USOF would likely invest
                  in
                  over-the-counter contracts to increase the level of correlation
                  of USOF’s
                  assets. Over-the-counter contracts entail certain risks described
                  below
                  under “Over-the-Counter Contract
                  Risk.”
  **·**
              USOF
                  may not be able to buy the exact number of Oil Futures Contracts
                  and Other
                  Oil Interests to have a perfect correlation with the Benchmark
                  Oil Futures
                  Contract if the purchase price of Oil Futures Contracts required
                  to be
                  fully invested in such contracts is higher than the proceeds received
                  for
                  the sale of a Creation Basket on the day the basket was sold. In
                  such
                  case, USOF could not invest the entire proceeds from the purchase
                  of the
                  Creation Basket in such futures contracts (for example, assume
                  USOF
                  receives $6,679,000 for the sale of a Creation Basket and assume
                  that the
                  price of an Oil Futures Contract for WTI light, sweet crude oil
                  is
                  $66,800, then USOF could only invest in only 99 Oil Futures Contracts
                  with
                  an aggregate value of $6,613,200). USOF would be required to invest
                  a
                  percentage of the proceeds in Treasuries to be deposited as margin
                  with
                  the futures commission merchant through which the contract was
                  purchased.
                  The remainder of the purchase price for the Creation Basket would
                  remain
                  invested in cash and Treasuries as determined by the General Partner
                  from
                  time to time based on factors such as potential calls for margin
                  or
                  anticipated redemptions. If the trading market for Oil Futures
                  Contracts
                  is suspended or closed, USOF may not be able to purchase these
                  investments
                  at the last reported price for such
                  investments.
  If
        changes in USOF’s NAV do not correlate with changes in the price of the
        Benchmark Oil Futures Contract, then  investing
        in USOF may not be an effective way to hedge against oil-related losses or
        indirectly invest in oil.
  ***The
          Benchmark Oil Futures Contract may not correlate with the spot price of
          WTI
          light, sweet, crude oil and this could cause the price of units to substantially
          vary from the spot price of WTI light, sweet crude oil. If this were to
          occur,
          then investors may not be able to effectively use USOF as a way to hedge
          against
          oil-related losses or as a way to indirectly invest in
          oil.***
  When
          using the Benchmark Oil Futures Contract as a strategy to track the spot
          price
          of WTI light, sweet crude oil, at best the correlation between changes
          in prices
          of such oil interests and the spot price can be only approximate. The degree
          of
          imperfection of correlation depends upon circumstances such as variations
          in the
          speculative oil market, supply of and demand for such oil interests and
          technical influences in oil futures trading. If there is a weak correlation
          between the oil interests and the spot price of WTI light, sweet, crude
          oil,
          then the price of units may not accurately track the spot price of WTI
          light,
          sweet crude oil and investors may not be able to effectively use USOF as
          a way
          to hedge the risk of losses in their oil-related transactions or as a way
          to
          indirectly invest in oil.
  ***USOF
          may experience a loss if it is required to sell Treasuries at a price lower
          than
          the price at which they were acquired.***
  The
          value
          of Treasuries generally moves inversely with movements in interest rates.
          If
          USOF is required to sell Treasuries at a price lower than the price at
          which
          they were acquired, USOF will experience a loss. This loss may adversely
          impact
          the price of the units and may decrease the correlation between the price
          of the
          units, the price of USOF’s Oil Futures Contracts and Other Oil Interests, and
          the spot price of WTI light, sweet crude oil.
 35
 ***Certain
          of USOF’s investments could be illiquid which could cause large losses to
          investors at any time or from time to time.***
  USOF
          may
          not always be able to liquidate its positions in its investments at the
          desired
          price. It is difficult to execute a trade at a specific price when there
          is a
          relatively small volume of buy and sell orders in a market. A market disruption,
          such as a foreign government taking political actions that disrupt the
          market in
          its currency, its oil production or exports, or in another major export,
          can
          also make it difficult to liquidate a position. Alternatively, limits imposed
          by
          futures exchanges or other regulatory organizations, such as accountability
          levels, position limits and daily price fluctuation limits, may contribute
          to a
          lack of liquidity with respect to some commodity interests.
  Unexpected
          market illiquidity may cause major losses to investors at any time or from
          time
          to time. In addition, USOF has not and does not intend to establish a credit
          facility, which would provide an additional source of liquidity and instead
          will
          rely only on the Treasuries, cash and cash equivalents that it holds. The
          anticipated large value of the positions in certain investments, e.g.,
          Oil
          Futures Contracts, or in negotiated over-the-counter contracts that the
          General
          Partner acquires or enters into for USOF, increases the risk of illiquidity.
          Such positions may be more difficult to liquidate at favorable prices and
          there
          is an additional risk that losses may be incurred during the period in
          which
          positions are being liquidated. The Other Oil Interests that USOF invests
          in may
          have a greater likelihood of being
          illiquid since they are contracts between two parties that take into account
          not
          only market risk, but also the relative credit, tax, and settlement risks
          under
          such contracts. In addition, such contracts have limited transferability
          that
          results from such risks and the contract’s express limitations. USOF from time
          to time also invests in Other Oil Interests as a result of the speculative
          position limits on the New York Mercantile Exchange or other
          exchanges.
  ***If
          the nature of hedgors and speculators in futures markets has shifted such
          that
          oil purchasers are the predominant hedgors in the market, USOF might have
          to
          reinvest at higher futures prices or choose Other Oil
          Interests.***
  The
          changing nature of the hedgors and speculators in the oil market influences
          whether futures prices are above or below the expected future spot price.
          In
          order to induce speculators to take the corresponding long side of the
          same
          futures contract, oil producers must generally be willing to sell futures
          contracts at prices that are below expected future spot prices. Conversely,
          if
          the predominant hedgors in the futures market are the purchasers of the
          oil who
          purchase futures contracts to hedge against a rise in prices, then speculators
          will only take the short side of the futures contract if the futures price
          is
          greater than the expected future spot price of oil. This can have significant
          implications for USOF when it is time to reinvest the proceeds from a maturing
          futures contract into a new futures contract.
  ***While
          USOF does not intend to take physical delivery of oil under Oil Futures
          Contracts, physical delivery under such contracts impacts the value of
          the
          contracts.***
  While
          USOF has not and does not intend to take physical delivery of oil under
          its Oil
          Futures Contracts, futures contracts are not required to be cash-settled,
          and it
          is possible to take delivery under these contracts. Storage costs associated
          with purchasing oil could result in costs and other liabilities that could
          impact the value of Oil Futures Contracts or Other Oil Interests. Storage
          costs
          include the time value of money invested in oil as a physical commodity
          plus the
          actual costs of storing the oil less any benefits from ownership of oil
          that are
          not obtained by the holder of a futures contract. In general, Oil Futures
          Contracts have a one-month delay for contract delivery and the back month
          (the
          back month is any future delivery month other than the spot month) includes
          storage costs. To the extent that these storage costs change for oil while
          USOF
          holds Oil Futures Contracts or Other Oil Interests, the value of the Oil
          Futures
          Contracts or Other Oil Interests, and therefore USOF’s NAV, may change as
          well.
 36
 ***The
          price relationship between the near month contract and the next to near
          month
          contract that compose the Benchmark Oil Futures Contract will vary and
          may
          impact both the total return over time of USOF’s NAV, as well as the degree to
          which its total return tracks other natural gas price indices’ total
          returns.***
  The
          design of USOF's  Benchmark Oil Futures Contract is such that every month
          it begins by using the near month contract to expire until the near month
          contract is within two weeks of expiration, when it will use the next month
          contract to expire as its benchmark contract and keeps that contract as
          its benchmark until it becomes the near month contract and close to
          expiration. In the event of an oil futures market where near month contracts
          trade at a higher price than next to near month contracts, a situation
          described
          as “backwardation” in the futures market occurs. Absent the impact of the
          overall movement in oil prices the value of the benchmark contract would
          tend to
          rise as it approaches expiration. As a result the total return of the Benchmark
          Oil 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 occurs. Absent the impact of the overall movement in oil prices
          the value
          of the benchmark contract would tend to decline as it approaches expiration.
          As
          a result the total return of the Benchmark Oil Futures Contract would tend
          to
          track lower. 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 USOF’s NAV to vary significantly. In the event of a prolonged period
          of contango, and absent the impact of rising or falling oil prices, this
          could
          have a significant negative impact on USOF’s NAV and total return.
  ***Regulation
          of the commodity interests and energy markets is extensive and constantly
          changing; future regulatory developments are impossible to predict but
          may
          significantly and adversely affect USOF.***
  The
          regulation of commodity interest transactions in the United States is a
          rapidly
          changing area of law and is subject to ongoing modification by government
          and
          judicial action. In addition, various national governments have expressed
          concern regarding the disruptive effects of speculative trading in the
          energy
          markets and the need to regulate the derivatives markets in general. The
          effect
          of any future regulatory change on USOF is impossible to predict, but could
          be
          substantial and adverse.
  ***Investing
          in USOF for purposes of hedging may be subject to several risks including
          the
          possibility of losing the benefit of favorable market
          movement.***
  While
          USOF is not currently engaging in hedging strategies, participants in the
          oil or
          in other industries may use USOF as a vehicle to hedge the risk of losses
          in
          their oil-related transactions. There are several risks in connection with
          using
          USOF as a hedging device. While hedging can provide protection against
          an
          adverse movement in market prices, it can also preclude a hedgor’s opportunity
          to benefit from a favorable market movement. In a hedging transaction,
          the
          hedgor may be concerned that the hedged item will increase in price, but
          must
          recognize the risk that the price may instead decline and if this happens
          he
          will have lost his opportunity to profit from the change in price because
          the
          hedging transaction will result in a loss rather than a gain. Thus, the
          hedgor
          foregoes the opportunity to profit from favorable price movements.
  In
          addition, if the hedge is not a perfect one, the hedgor can lose on the
          hedging
          transaction and not realize an offsetting gain in the value of the underlying
          item being hedged.
  When
          using futures contracts as a hedging technique, at best, the correlation
          between
          changes in prices of futures contracts and of the items being hedged can
          be only
          approximate. The degree of imperfection of correlation depends upon
          circumstances such as: variations in speculative markets, demand for futures
          and
          for oil products, technical influences in futures trading, and differences
          between anticipated energy costs being hedged and the instruments underlying
          the
          standard futures contracts available for trading. Even a well-conceived
          hedge
          may be unsuccessful to some degree because of unexpected market behavior
          as well
          as the expenses associated with creating the hedge.
  In
          addition, using an investment in USOF as a hedge for changes in energy
          costs
          ( *e.g.* ,
          investing in oil, gasoline, or other fuels, or electricity) may not correlate
          because changes in the spot price of oil may vary from changes in energy
          costs
          because the spot price of oil does not reflect the refining, transportation,
          and
          other costs that may impact the hedgor’s energy costs.
 37
 ***An
          investment in USOF may provide little or no diversification benefits. Thus,
          in a
          declining market, USOF may have no gains to offset losses from other
          investments, and an investor may suffer losses on an investment in USOF
          while
          incurring losses with respect to other asset classes.***
  Historically,
          Oil Futures Contracts and Other Oil Interests have generally been non-correlated
          to the performance of other asset classes such as stocks and bonds.
          Non-correlation means that there is a low statistically valid relationship
          between the performance of futures and other commodity interest transactions,
          on
          the one hand, and stocks or bonds, on the other hand. However, there can
          be no
          assurance that such non-correlation will continue during future periods.
          If,
          contrary to historic patterns, USOF’s performance were to move in the same
          general direction as the financial markets, investors will obtain little
          or no
          diversification benefits from an investment in the units. In such a case,
          USOF
          may have no gains to offset losses from other investments, and investors
          may suffer losses on their investment in USOF at the same time they incur
          losses
          with respect to other investments.
  Variables
          such as drought, floods, weather, embargoes, tariffs and other political
          events
          may have a larger impact on oil prices and oil-linked instruments, including
          Oil
          Futures Contracts and Other Oil Interests, than on traditional securities.
          These
          additional variables may create additional investment risks that subject
          USOF’s
          investments to greater volatility than investments in traditional
          securities.
  Non-correlation
          should not be confused with negative correlation, where the performance
          of two
          asset classes would be opposite of each other. There is no historic evidence
          that the spot price of oil and prices of other financial assets, such as
          stocks
          and bonds, are negatively correlated. In the absence of negative correlation,
          USOF cannot be expected to be automatically profitable during unfavorable
          periods for the stock market, or vice versa.
  **USOF’s
          Operating Risks**
  ***USOF
          is not a registered investment company so unitholders do not have the
          protections of the Investment Company Act of 1940.***
  USOF
          is
          not an investment company subject to the Investment Company Act of 1940.
          Accordingly, investors do not have the protections afforded by that statute
          which, for example, requires investment companies to have a majority of
          disinterested directors and regulates the relationship between the investment
          company and its investment manager.
  ***USOF
          has a limited operating history so there is no extensive performance history
          to
          serve as a basis to evaluate an investment in USOF.***
  USOF
          is
          new and has a limited operating history. Therefore, it does not have extensive
          past performance that could otherwise be used as a basis to evaluate an
          investment in USOF. Mr. Nicholas Gerber (discussed below) is the only
          principal that has any experience operating a commodity pool. Mr. Gerber
          ran the Marc Stevens Futures Index Fund (further discussed below) over
          10 years
          ago. This fund combined investments in commodity futures and equity stock
          index
          futures and had under $1 million of assets. Mr. Gerber sold the fund to
          Newport Commodities. No other principals of the General Partner have operated
          a
          public or private commodity pool.
  ***The
          General Partner is leanly staffed and relies heavily on key personnel to
          manage
          trading activities.***
  In
          managing and directing the day-to-day activities and affairs of USOF, the
          General Partner relies heavily on Mr. Nicholas Gerber, Mr. John Love
          and Mr. John Hyland (all discussed in greater detail below). If
          Mr. Gerber, Mr. Love or Mr. Hyland were to leave or be unable to
          carry out their present responsibilities, it may have an adverse effect
          on the
          management of USOF. Furthermore, Mr. Gerber, Mr. Love and
          Mr. Hyland are involved in the management of USNG. USNG is expected to
          be a public commodity pool designed to track the price movements of natural
          gas.
          Mr. Gerber and Mr. Love are also employed by Ameristock Corporation, a
          registered investment adviser that manages a public mutual fund. USOF estimates
          that Mr. Gerber will spend approximately 50% of his time on USOF and USNG
          matters, Mr. Love will spend approximately 70% of his time on USOF and USNG
          matters and Mr. Hyland will spend approximately 50% of his time on USOF and
          USNG matters.
 38
 ***Accountability
          levels, position limits, and daily price fluctuation limits set by the
          exchanges
          have the potential to cause a tracking error, which could cause the price
          of
          units to substantially vary from the price of the Benchmark Oil Futures
          Contract
          and prevent investors from being able to effectively use USOF as a way
          to hedge
          against oil-related losses or as a way to indirectly invest in
          oil.***
  U.S.
          designated contract markets such as the New York Mercantile Exchange have
          established accountability levels and position limits on the maximum net
          long or
          net short futures contracts in commodity interests that any person or
          group of persons under common trading control (other as a hedge, which
          an
          investment in USOF is not) may hold, own or control. For example, the current
          accountability level for investments at any one time in Oil Futures Contracts
          (including investments in the Benchmark Oil Futures Contract) is 20,000.
          While
          this is not a fixed ceiling, it is a threshold above which the New York
          Mercantile Exchange may exercise greater scrutiny and control over an investor,
          including limiting an investor to holding no more than 20,000 Oil Futures
          Contracts. With regard to position limits, the New York Mercantile Exchange
          limits an investor from holding more than 2,000 net futures in the last
          3 days
          of trading in the near month contract to expire.
  In
          addition to accountability levels and position limits, the New York Mercantile
          Exchange also sets daily price fluctuation limits on the Benchmark Oil
          Futures
          Contract. The daily price fluctuation limit establishes the maximum amount
          that
          the price of futures contracts may vary either up or down from the previous
          day’s settlement price. Once the daily price fluctuation limit has been reached
          in a particular Oil Futures Contract, no trades may be made at a price
          beyond
          that limit.
  In
          addition to accountability levels and position limits, the New York Mercantile
          Exchange also limits the amount of price fluctuation for Oil Futures Contracts.
          For example, the New York Mercantile Exchange imposes a $10.00 per barrel
          ($10,000 per contract) price fluctuation limit for Oil Futures Contracts.
          This
          limit is initially based off of the previous trading day’s settlement price. If
          any Oil Futures Contract is traded, bid, or offered at the limit for five
          minutes, trading is halted for five minutes. When trading resumes it begins
          at
          the point where the limit was imposed and the limit is reset to be $10.00
          per
          barrel in either direction of that point. If another halt were triggered,
          the
          market would continue to be expanded by $10.00 per barrel in either direction
          after each successive five-minute trading halt. There is no maximum price
          fluctuation limits during any one trading session.
  All
          of
          these limits may potentially cause a tracking error between the price of
          the
          units and the price of the Benchmark Oil Futures Contract.This may in turn
          prevent investors from being able to effectively use USOF as a way to hedge
          against oil-related losses or as a way to indirectly invest in oil.
  USOF
          has
          not limited the size of its offering and is committed to utilizing substantially
          all of its proceeds to purchase Oil Futures Contracts and Other Oil Interests.
          If USOF encounters accountability levels, position limits, or price fluctuation
          limits for oil contracts on the New York Mercantile Exchange, it has and
          will
          continue to, if permitted under applicable regulatory requirements, purchase
          futures contracts on the ICE Futures (formerly, the International Petroleum
          Exchange) or other exchanges that trade listed oil futures. The futures
          contracts available on the ICE Futures are generally comparable to the
          contracts
          on the New York Mercantile Exchange, but they may have different underlying
          commodities, sizes, deliveries, and prices.
  ***There
          are technical and fundamental risks inherent in the trading system the
          General
          Partner intends to employ.***
  The
          General Partner’s trading system is quantitative in nature and it is possible
          that the General Partner might make a mathematical error. In addition,
          it is
          also possible that a computer or software program may malfunction and cause
          an
          error in computation.
  ***USOF
          and the General Partner may have conflicts of interest, which may permit
          them to
          favor their own interests to the detriment of
          unitholders.***
  USOF
          and
          the General Partner may have inherent conflicts to the extent the General
          Partner attempts to maintain USOF’s asset size in order to preserve its fee
          income and this may not always be consistent with USOF’s objective of tracking
          changes in the spot price of WTI light, sweet crude oil. The General Partner’s
          officers, directors and employees do not devote their time exclusively
          to USOF.
          These persons are directors, officers or employees of other entities that
          may
          compete with USOF for their services. They could have a conflict between
          their
          responsibilities to USOF and to those other entities.
 39
 In
          addition, the General Partner’s principals, officers, directors or employees may
          trade futures and related contracts for their own account. A conflict of
          interest may exist if their trades are in the same markets and at the same
          time
          as USOF trades using the clearing broker to be used by USOF. A potential
          conflict also may occur if the General Partner’s principals, officers, directors
          or employees trade their accounts more aggressively or take positions in
          their
          accounts which are opposite, or ahead of, the positions taken by
          USOF.
  The
          General Partner has sole current authority to manage the investments and
          operations of USOF, and this may allow it to act in a way that furthers
          its own
          interests which may create a conflict with the best interests of investors.
          Limited partners have limited voting control, which will limit the ability
          to
          influence matters such as amendment of the LP Agreement, change in USOF’s basic
          investment policy, dissolution of this fund, or the sale or distribution
          of
          USOF’s assets.
  The
          General Partner serves
          as the general partner to both USOF and USNG. The General Partner may have
          a
          conflict to the extent that its trading decisions may be influenced by
          the
          effect they would have on USNG. These trading decisions may be influenced
          since the General Partner also serves as the general partner for USNG and
          is required to meet USNG’s investment objective as well as USOF’s. If the
          General Partner believes that a trading decision it made on behalf of USOF
          might
          (i) impede USNG from reaching its investment objective, or (ii) improve
          the
          likelihood of meeting USNG’s objective, then the General Partner may choose to
          change its trading decision for USOF, which could either impede or improve
          the
          opportunity for USOF from meeting its investment objective. In addition,
          the
          General Partner is required to indemnify the officers and directors of
          USNG, if
          the need for indemnification arises. This potential indemnification will
          cause
          the General Partner’s assets to decrease. If the General Partner’s other sources
          of income are not sufficient to compensate for the indemnification, then
          the
          General Partner may terminate and investors could lose their
          investment.
  ***Unitholders
          may only vote on the removal of the General Partner and limited partners
          have
          only limited voting rights. Unitholders and limited partners will not
          participate in the management of USOF and do not control the General Partner
          so
          they will not have influence over basic matters that affect
          USOF.***
  Unitholders
            that have not applied to become limited partners have no voting rights,
            other
            than to remove the General Partner. Limited partners will have limited
            voting
            rights with respect to USOF’s affairs. Unitholders may remove the General
            Partner only if 66 2/3% of the unitholders elect to do so. Unitholders
            and
            limited partners will not be permitted to participate in the management
            or
            control of USOF or the conduct of its business. Unitholders and limited
            partners
            must therefore rely upon the duties and judgment of the General Partner
            to
            manage USOF’s affairs.
   ***The
          General Partner may manage a large amount of assets and this could affect
          USOF’s
          ability to trade profitably.***
  Increases
          in assets under management may affect trading decisions. In general, the
          General
          Partner does not intend to limit the amount of assets of USOF that it may
          manage. The more assets the General Partner manages, the more difficult
          it may
          be for it to trade profitably because of the difficulty of trading larger
          positions without adversely affecting prices and performance and of managing
          risk associated with larger positions.
  ***USOF
          could terminate at any time and cause the liquidation and potential loss
          of an
          investor's investment and could upset the overall maturity and timing of
          an
          investor's investment portfolio.***
  USOF
          may
          terminate at any time, regardless of whether USOF has incurred losses,
          subject
          to the terms of the LP Agreement. In particular, unforeseen circumstances,
          including the death, adjudication of incompetence, bankruptcy, dissolution,
          or
          removal of the General Partner could cause USOF to terminate unless a majority
          interest of the limited partners within 90 days of the event elects to
          continue
          the partnership and appoints a successor general partner, or the affirmative
          vote of a majority interest of the limited partners subject to certain
          conditions. However, no level of losses will require the General Partner
          to
          terminate USOF. USOF’s termination would cause the liquidation and potential
          loss of an investor's investment. Termination could also negatively affect
          the
          overall maturity and timing of an investor's investment
          portfolio.
 40
 ***Limited
          partners may not have limited liability in certain circumstances, including
          potentially having liability for the return of wrongful
          distributions.***
  Under
          Delaware law, a limited partner might be held liable for our obligation
          as if it
          were a General Partner if the limited partner participates in the control
          of the
          partnership’s business and the persons who transact business with the
          partnership think the limited partner is the General Partner.
  A
          limited
          partner will not be liable for assessments in addition to its initial capital
          investment in any of our capital securities representing limited partnership
          interests. However, a limited partner may be required to repay to us any
          amounts
          wrongfully returned or distributed to it under some circumstances. Under
          Delaware law, we may not make a distribution to limited partners if the
          distribution causes our liabilities (other than liabilities to partners
          on
          account of their partnership interests and nonrecourse liabilities) to
          exceed
          the fair value of our assets. Delaware law provides that a limited partner
          who
          receives such a distribution and knew at the time of the distribution that
          the
          distribution violated the law will be liable to the limited partnership
          for the
          amount of the distribution for three years from the date of the
          distribution.
  ***With
          adequate notice, a limited partner may be required to withdraw from the
          partnership for any reason.***
  If
          the
          General Partner gives at least fifteen (15) days’ written notice to a limited
          partner, then the General Partner may for any reason, in its sole discretion,
          require any such limited partner to withdraw entirely from the partnership
          or to
          withdraw a portion of his partner capital account. The General Partner
          may
          require withdrawal even in situations where the limited partner has complied
          completely with the provisions of the LP Agreement.
  ***USOF’s
          existing units are, and any units USOF issues in the future will be, subject
          to
          restrictions on transfer. Failure to satisfy these requirements will preclude
          a
          transferee from being able to have all the rights of a limited
          partner.***
  No
          transfer of any unit or interest therein may be made if such transfer would
          (a)
          violate the then applicable federal or state securities laws or rules and
          regulations of the SEC, any state securities commission, the CFTC or any
          other
          governmental authority with jurisdiction over such transfer, or (b) cause
          USOF
          to be taxable as a corporation or affect USOF’s existence or qualification as a
          limited partnership. In addition, investors may only become limited partners
          if
          they transfer their units to purchasers that meet certain conditions outlined
          in
          the LP Agreement, which provides that each record holder or limited partner
          or
          unitholder applying to become a limited partner (each a record holder)
          may be
          required by the General Partner to furnish certain information, including
          that
          holder’s nationality, citizenship or other related status. A transferee who is
          not a U.S. resident may not be eligible to become a record holder or a
          limited
          partner if its ownership would subject USOF to the risk of cancellation
          or
          forfeiture of any of its assets under any federal, state or local law or
          regulation. All purchasers of USOF’s units, who wish to become limited partners
          or record holders, and receive cash distributions, if any, or have certain
          other
          rights, must deliver an executed transfer application in which the purchaser
          or
          transferee must certify that, among other things, he, she or it agrees
          to
          be bound by USOF’s LP Agreement and is eligible to purchase USOF’s securities.
          Any transfer of units will not be recorded by the transfer agent or recognized
          by us unless a completed transfer application is delivered to the General
          Partner or the Administrator. A person purchasing USOF’s existing units, who
          does not execute a transfer application and certify that the purchaser
          is
          eligible to purchase those securities acquires no rights in those securities
          other than the right to resell those securities. Whether or not a transfer
          application is received or the consent of the General Partner obtained,
          our
          units will be securities and will be transferable according to the laws
          governing transfers of securities. See “Transfer of Units.”
  ***USOF
          does not expect to make cash distributions.***
  The
          General Partner intends to re-invest any realized gains in additional oil
          interests rather than distributing cash to limited partners. Therefore,
          unlike
          mutual funds, commodity pools or other investment pools that actively manage
          their investments in an attempt to realize income and gains from their
          investing
          activities and distribute such income and gains to their investors, USOF
          generally does not expect to distribute cash to limited partners. An investor
          should not invest in USOF if it will need cash distributions from USOF
          to pay
          taxes on its share of income and gains of USOF, if any, or for any other
          reason.
          Although USOF does not intend to make cash distributions, the income earned
          from
          its investments held directly or posted as margin may reach levels that
          merit
          distribution, e.g., at levels where such income is not necessary to support
          its
          underlying investments in Oil Interests and investors adversely react to
          being
          taxed on such income without receiving distributions that could be used
          to pay
          such tax. If this income becomes significant then cash distributions may
          be
          made.
 41
 ***There
          is a risk that USOF will not earn trading gains sufficient to compensate
          for the
          fees and expenses that it must pay and as such USOF may not earn any
          profit.***
  USOF
          pays
          brokerage charges of approximately 0.15%, futures commission merchant fees
          of
          $3.50 per buy or sell, management fees of 0.50% of NAV on the first
          $1,000,000,000 of assets and 0.20% of NAV after the first $1,000,000,000
          of
          assets, and over-the-counter spreads and extraordinary expenses ( *i.e.* expenses
          not in the ordinary course of business, including the indemnification of
          any
          person against liabilities and obligations to the extent permitted by law
          and
          required under the LP Agreement and under agreements entered into by the
          General
          Partner on USOF’s behalf and the bringing and defending of actions at law or in
          equity and otherwise engaging in the conduct of litigation and the incurring
          of
          legal expenses and the settlement of claims and litigation) that can not
          be
          quantified. These fees and expenses must be paid in all cases regardless
          of
          whether USOF’s activities are profitable. Accordingly, USOF must earn trading
          gains sufficient to compensate for these fees and expenses before it can
          earn
          any profit.
  ***USOF
          may incur higher fees and expenses upon renewing existing or entering into
          new
          contractual relationships.***
  The
          clearing arrangements between the clearing brokers and USOF generally are
          terminable by the clearing brokers once the clearing broker has given USOF
          notice. Upon termination, the General Partner may be required to renegotiate
          or
          make other arrangements for obtaining similar services if USOF intends
          to
          continue trading in Oil Futures Contracts or Other Oil Interest contracts
          at its
          present level of capacity.
  The
          services of any clearing broker may not be available, or even if available,
          these services may not be available on the terms as favorable as those
          of the
          expired or terminated clearing arrangements.
  ***USOF
          may miss certain trading opportunities because it will not receive the
          benefit
          of the expertise of trading advisors.***
  The
          General Partner does not employ trading advisors for USOF; however, it
          reserves
          the right to employ them in the future. The only advisor to USOF is the
          General
          Partner. A lack of trading advisors may be disadvantageous to USOF because
          it
          will not receive the benefit of a trading advisor’s expertise.
  ***An
          unanticipated number of redemption requests during a short period of time
          could
          have an adverse effect on the NAV of USOF.***
  If
          a
          substantial number of requests for redemption of Redemption Baskets are
          received
          by USOF during a relatively short period of time, USOF may not be able
          to
          satisfy the requests from USOF’s assets not committed to trading. As a
          consequence, it could be necessary to liquidate positions in USOF’s trading
          positions before the time that the trading strategies would otherwise dictate
          liquidation.
  ***The
          failure or bankruptcy of a clearing broker could result in a substantial
          loss of
          USOF’s assets.***
  Under
          CFTC regulations, a clearing broker maintains customers’ assets in a bulk
          segregated account. If a clearing broker fails to do so, or is unable to
          satisfy
          a substantial deficit in a customer account, its other customers may be
          subject
          to risk of loss of their funds in the event of that clearing broker’s
          bankruptcy. In that event, the clearing broker’s customers, such as USOF, are
          entitled to recover, even in respect of property specifically traceable
          to them,
          only a proportionate share of all property available for distribution to
          all of
          that clearing broker’s customers. USOF also may be subject to the risk of the
          failure of, or delay in performance by, any exchanges and markets and their
          clearing organizations, if any, on which commodity interest contracts are
          traded.
  From
          time
          to time, the clearing brokers may be subject to legal or regulatory proceedings
          in the ordinary course of their business. A clearing broker’s involvement in
          costly or time-consuming legal proceedings may divert financial resources
          or
          personnel away from the clearing broker’s trading operations, which could impair
          the clearing broker’s ability to successfully execute and clear USOF’s
          trades.
 42
 ***Third
            parties may infringe upon or otherwise violate intellectual property
            rights or
            assert that the General Partner has infringed or otherwise violated their
            intellectual property rights, which may result in significant costs and
            diverted
            attention.***
  Third
            parties may utilize USOF’s intellectual property or technology, including the
            use of its business methods, trademarks and trading program software,
            without
            permission. The General Partner has a patent pending for USOF’s business method
            and it is registering its trademarks. USOF does not currently have any
            proprietary software. However, if it obtains proprietary software in
            the future,
            then any unauthorized use of USOF’s proprietary software and other technology
            could also adversely affect its competitive advantage. USOF may have
            difficulty
            monitoring unauthorized uses of its patents, trademarks, proprietary
            software
            and other technology. Also, third parties may independently develop business
            methods, trademarks or proprietary software and other technology similar
            to that
            of the General Partner or claim that the General Partner has violated
            their
            intellectual property rights, including their copyrights, trademark rights,
            trade names, trade secrets and patent rights. As a result, the General
            Partner
            may have to litigate in the future to protect its trade secrets, determine
            the
            validity and scope of other parties’ proprietary rights, defend itself against
            claims that it has infringed or otherwise violated other parties’ rights, or
            defend itself against claims that its rights are invalid. Any litigation
            of this
            type, even if the General Partner is successful and regardless of the
            merits,
            may result in significant costs, divert its resources from USOF, or require
            it
            to change its proprietary software and other technology or enter into
            royalty or
            licensing agreements.
  ***The
            success of USOF depends on the ability of the General Partner to accurately
            implement trading systems, and any failure to do so could subject USOF
            to losses
            on such transactions.***
  The
            General Partner uses mathematical formulas built into a generally available
            spreadsheet program to decide whether it should buy or sell oil interests
            each
            day. Specifically, the General Partner uses the spreadsheet to make mathematical
            calculations and to monitor positions in oil interests and Treasuries
            and
            correlations to the spot price of WTI light, sweet crude oil. The General
            Partner must accurately process the spreadsheet’s outputs and execute the
            transactions called for by the formulas. In addition, USOF relies on
            the General
            Partner to properly operate and maintain its computer and communications
            systems. Execution of the formulas
            and operation of the systems are subject to human error. Any failure,
            inaccuracy
            or delay in implementing any of the formulas or systems and executing
            USOF’s
            transactions could impair its ability to achieve USOF’s investment objective. It
            could also result in decisions to undertake transactions based on inaccurate
            or
            incomplete information. This could cause substantial losses on
            transactions.
  ***USOF
            may experience substantial losses on transactions if the computer or
            communications system fails.***
  USOF’s
            trading activities, including its risk management, depend on the integrity
            and
            performance of the computer and communications systems supporting them.
            Extraordinary transaction volume, hardware or software failure, power
            or
            telecommunications failure, a natural disaster or other catastrophe could
            cause
            the computer systems to operate at an unacceptably slow speed or even
            fail. Any
            significant degradation or failure of the systems that the General Partner
            uses
            to gather and analyze information, enter orders, process data, monitor
            risk
            levels and otherwise engage in trading activities may result in substantial
            losses on transactions, liability to other parties, lost profit opportunities,
            damages to the General Partner’s and USOF’s reputations, increased operational
            expenses and diversion of technical resources.
  ***If
            the computer and communications systems are not upgraded, as needed,
            USOF’s
            financial condition could be harmed.***
  The
            development of complex computer and communications systems and new technologies
            may render the existing computer and communications systems supporting
            USOF’s
            trading activities obsolete. In addition, these computer and communications
            systems must be compatible with those of third parties, such as the systems
            of
            exchanges, clearing brokers and the executing brokers. As a result, if
            these
            third parties upgrade their systems, the General Partner will need to
            make
            corresponding upgrades to continue effectively its trading activities.
            USOF’s
            future success will depend on USOF’s ability to respond to changing technologies
            on a timely and cost-effective basis.
 43
 ***USOF
            depends on the reliable performance of the computer and communications
            systems
            of third parties, such as brokers and futures exchanges, and may experience
            substantial losses on transactions if they fail.***
  USOF
            depends on the proper and timely function of complex computer and communications
            systems maintained and operated by the futures exchanges, brokers and
            other data
            providers that the General Partner uses to conduct trading activities.
            Failure
            or inadequate performance of any of these systems could adversely affect
            the
            General Partner’s ability to complete transactions, including its ability to
            close out positions, and result in lost profit opportunities and significant
            losses on commodity interest transactions. This could have a material
            adverse
            effect on revenues and materially reduce USOF’s available capital. For example,
            unavailability of price quotations from third parties may make it difficult
            or
            impossible for the General Partner to use its proprietary software that
            it
            relies upon to conduct its trading activities. Unavailability of records
            from
            brokerage firms may make it difficult or impossible for the General Partner
            to
            accurately determine which transactions have been executed or the details,
            including price and time, of any transaction executed. This unavailability
            of
            information also may make it difficult or impossible for the General
            Partner to
            reconcile its records of transactions with those of another party or
            to
            accomplish settlement of executed transactions.
  ***The
            occurrence of a terrorist attack, or the outbreak, continuation or expansion
            of
            war or other hostilities could disrupt USOF’s trading activity and materially
            affect USOF’s profitability.***
  The
            operations of USOF, the exchanges, brokers and counterparties with which
            USOF
            does business, and the markets in which USOF does business could be severely
            disrupted in the event of a major terrorist attack or the outbreak, continuation
            or expansion of war or other hostilities. The terrorist attacks of September
            11,
            2001 and the war in Iraq, global anti-terrorism initiatives and political
            unrest
            in the Middle East and Southeast Asia continue to fuel this
            concern.
  **Risk
            of Leverage and Volatility**
  ***If
            the General Partner permits USOF to become leveraged, investors could
            lose all
            or substantially all of their investment if USOF’s trading positions suddenly
            turn unprofitable.***
  Commodity
            pools’ trading positions in futures contracts or other commodity interests are
            typically required to be secured by the deposit of margin funds that
            represent
            only a small percentage of a futures contract’s (or other commodity interests’)
            entire face value. This feature permits commodity pools to “leverage” their
            assets by purchasing
            or selling futures contracts (or other commodity interests) with an aggregate
            value in excess of the commodity pool’s assets. While this leverage can increase
            the pool’s profits, relatively small adverse movements in the price of the
            pool’s futures contracts can cause significant losses to the pool. While the
            General Partner does not currently leverage USOF’s assets, it is not prohibited
            from doing so under the LP Agreement or otherwise.
  **Over-the-Counter
            Contract Risk**
  ***Over-the-counter
            transactions are subject to little, if any,
            regulation.***
  A
            portion
            of USOF’s assets may be used to trade over-the-counter oil interest contracts,
            such as forward contracts or swap or spot contracts. Over-the-counter
            contracts
            are typically traded on a principal-to-principal basis through dealer
            markets
            that are dominated by major money center and investment banks and other
            institutions and are essentially unregulated by the CFTC. Investors therefore
            do
            not receive the protection of CFTC regulation or the statutory scheme
            of the
            Commodity Exchange Act in connection with this trading activity by USOF.
            The
            markets for over-the-counter contracts rely upon the integrity of market
            participants in lieu of the additional regulation imposed by the CFTC
            on
            participants in the futures markets. The lack of regulation in these
            markets
            could expose USOF in certain circumstances to significant losses in the
            event of
            trading abuses or financial failure by participants.
 44
 ***USOF
            will be subject to credit risk with respect to counterparties to
            over-the-counter contracts entered into by USOF or held by special purpose
            or
            structured vehicles.***
  USOF
            faces the risk of non-performance by the counterparties to the over-the-counter
            contracts. Unlike in futures contracts, the counterparty to these contracts
            is
            generally a single bank or other financial institution, rather than a
            clearing
            organization backed by a group of financial institutions. As a result,
            there
            will be greater counterparty credit risk in these transactions. A counterparty
            may not be able to meet its obligations to USOF, in which case USOF could
            suffer
            significant losses on these contracts.
  If
            a
            counterparty becomes bankrupt or otherwise fails to perform its obligations
            due
            to financial difficulties, USOF may experience significant delays in
            obtaining
            any recovery in a bankruptcy or other reorganization proceeding. USOF
            may obtain
            only limited recovery or may obtain no recovery in such
            circumstances.
  ***USOF
            may be subject to liquidity risk with respect to its over-the-counter
            contracts.***
  Over-the-counter
            contracts may have terms that make them less marketable than Oil Futures
            Contracts. Over-the-counter contracts are less marketable because they
            are not
            traded on an exchange, do not have uniform terms and conditions, and
            are entered
            into based upon the creditworthiness of the parties and the availability
            of
            credit support, such
            as
            collateral, and in general, they are not transferable without the consent
            of the
            counterparty. These conditions diminish the ability to realize the full
            value of
            such contracts.
  **Risk
            of Trading in International Markets**
  ***Trading
            in international markets would expose USOF to credit and regulatory
            risk.***
  The
            General Partner invests primarily in Oil Futures Contracts, a significant
            portion of which are traded on United States exchanges including the
            New York
            Mercantile Exchange. However, a portion of USOF’s trades take place on markets
            and exchanges outside the United States. Some non-U.S. markets present
            risks
            because they are not subject to the same degree of regulation as their
            U.S.
            counterparts. None of the CFTC, NFA, or any domestic exchange regulates
            activities of any foreign boards of trade or exchanges, including the
            execution,
            delivery and clearing of transactions, nor has the power to compel enforcement
            of the rules of a foreign board of trade or exchange or of any applicable
            non-U.S. laws. Similarly, the rights of market participants, such as
            USOF, in
            the event of the insolvency or bankruptcy of a non-U.S. market or broker
            are
            also likely to be more limited than in the case of U.S. markets or brokers.
            As a
            result, in these markets, USOF has less legal and regulatory protection
            than it
            does when it trades domestically.
  In
            some
            of these non-U.S. markets, the performance on a contract is the responsibility
            of the counterparty and is not backed by an exchange or clearing corporation
            and
            therefore exposes USOF to credit risk. Trading in non-U.S. markets also
            leaves
            USOF susceptible to swings in the value of the local currency against
            the U.S.
            dollar. Additionally, trading on non-U.S. exchanges is subject to the
            risks
            presented by exchange controls, expropriation, increased tax burdens
            and
            exposure to local economic declines and political instability. An adverse
            development with respect to any of these variables could reduce the profit
            or
            increase the loss earned on trades in the affected international
            markets.
 45
 ***International
            trading activities subject USOF to foreign exchange
            risk.***
  The
            price
            of any non-U.S. futures, options on futures or other commodity interest contract
            and, therefore, the potential profit and loss on such contract, may be
            affected
            by any variance in the foreign exchange rate between the time the order
            is
            placed and the time it is liquidated, offset or exercised. As a result,
            changes
            in the value of the local currency relative to the U.S. dollar may cause
            losses
            to USOF even if the contract traded is profitable.
  ***USOF’s
            international trading would expose it to losses resulting from non-U.S.
            exchanges that are less developed or less reliable than United States
            exchanges.***
  Some
            non-U.S. exchanges may be in a more developmental stage so that prior
            price
            histories may not be indicative of current price dynamics. In addition,
            USOF may
            not have the same access to certain positions on foreign trading exchanges
            as do
            local traders, and the historical market data on which General Partner
            bases its
            strategies may not be as reliable or accessible as it is for U.S.
            exchanges.
  **Tax
            Risk**
  ***An
            investor's tax liability may exceed the amount of distributions, if any,
            on its
            units.***
  Cash
            or
            property will be distributed at the sole discretion of the General Partner,
            and
            the General Partner currently does not intend to make cash or other
            distributions with respect to units. Investors will be required to pay
            U.S.
            federal income tax and, in some cases, state, local, or foreign income
            tax, on
            their allocable share of USOF’s taxable income, without regard to whether they
            receive distributions or the amount of any distributions. Therefore,
            the tax
            liability of an investor with respect to its units may exceed the amount of
            cash or value of property (if any) distributed.
  ***An
            investor's allocable share of taxable income or loss may differ from
            its
            economic income or loss on its units.***
  Due
            to
            the application of the assumptions and conventions applied by USOF in
            making
            allocations for tax purposes and other factors, an investor's allocable
            share of
            USOF’s income, gain, deduction or loss may be different than its economic
            profit or loss from its units for a taxable year. This difference could
            be
            temporary or permanent and, if permanent, could result in it being taxed
            on
            amounts in excess of its economic income.
  ***Items
            of income, gain, deduction, loss and credit with respect to units could
            be
            reallocated if the IRS does not accept the assumptions and conventions
            applied
            by USOF in allocating those items, with potential adverse consequences
            for an
            investor.***
  The
            U.S.
            tax rules pertaining to partnerships are complex and their application
            to large,
            publicly traded partnerships such as USOF is in many respects uncertain.
            USOF
            applies certain assumptions and conventions in an attempt to comply with
            the
            intent of the applicable rules and to report taxable income, gains, deductions,
            losses and credits in a manner that properly reflects unitholders’ economic
            gains and losses. These assumptions and conventions may not fully comply
            with
            all aspects of the Internal Revenue Code (“Code”) and applicable Treasury
            Regulations, however, and it is possible that the U.S. Internal Revenue
            Service
            will successfully challenge our allocation methods and require us to
            reallocate
            items of income, gain, deduction, loss or credit in a manner that adversely
            affects investors. If this occurs, investors may be required to file
            an amended
            tax return and to pay additional taxes plus deficiency interest.
 46
 ***We
            could be treated as a corporation for federal income tax purposes, which
            may
            substantially reduce the value of the units.***
  USOF
            has
            received an opinion of counsel that, under current U.S. federal income
            tax laws,
            USOF will be treated as a partnership that is not taxable as a corporation
            for
            U.S. federal income tax purposes, provided that (i) at least 90 percent
            of
            USOF’s annual gross income consists of “qualifying income” as defined in the
            Code, (ii) USOF is organized and operated in accordance with its governing
            agreements and applicable law and (iii) USOF does not elect to be taxed
            as a
            corporation for federal income tax purposes. Although the General Partner
            anticipates that USOF will satisfy the “qualifying income” requirement for all
            of its taxable years, that result cannot be assured. USOF has not requested
            and
            will not request any ruling from the IRS with respect to its classification
            as a
            partnership not taxable as a corporation for federal income tax purposes.
            If the
            IRS were to successfully assert that USOF is taxable as a corporation
            for
            federal income tax purposes in any taxable year, rather than passing
            through its
            income, gains, losses and deductions proportionately to unitholders,
            USOF would
            be subject to tax on its net income for the year at corporate tax rates.
            In
            addition, although the General Partner does not currently intend to make
            distributions with respect to units, any distributions would be taxable
            to
            unitholders as dividend income. Taxation of USOF as a corporation could
            materially reduce the after-tax return on an investment in units and
            could
            substantially reduce the value of the units.
  **Legal
            Risks**
  ***Representatives
            of the New York Mercantile Exchange have notified USOF of its belief
            that USOF
            is engaging in unauthorized use of such Exchange’s service marks and settlement
            prices.***
  USOF
            invests primarily in Oil Futures Contracts, and particularly in Oil Futures
            Contracts traded on the New York Mercantile Exchange. Representatives
            of the New
            York Mercantile Exchange have at various times asserted varying claims
            regarding
            USOF’s operations and the Exchange’s service marks and settlement prices of oil
            futures contracts traded on the Exchange.
  The
            New
            York Mercantile Exchange initially claimed that USOF’s use of the Exchange’s
            service marks would cause confusion as to USOF’s source, origin, sponsorship or
            approval, and constitute infringement of the Exchange’s trademark rights and
            unfair competition and dilution of the Exchange’s marks. In response to these
            claims, the General Partner changed USOF’s name. In addition, USOF expressly
            disclaims any association with the Exchange or endorsement of USOF by
            the
            Exchange and acknowledges that “NYMEX” and “New York Mercantile Exchange” are
            registered trademarks of such Exchange.
  The
            General Partner has also engaged in discussions with the New York Mercantile
            Exchange regarding a possible license agreement. In this regard, USOF
            received a
            letter from the Exchange dated March 29, 2006 (“March 29th Letter”). The March
            29th Letter was in response to USOF’s request for additional information in
            connection with the negotiation of the possible license agreement. In
            the March
            29th Letter, the Exchange stated that it would cause the cessation of
            any market
            data vendor’s provision of New York Mercantile Exchange settlement prices to
            USOF and/or take other action to prevent USOF from using any New York
            Mercantile
            Exchange settlement prices unless USOF enters into a license agreement
            with the
            Exchange, or has indicated in writing that it will cease from using any
            Exchange
            settlement prices. USOF will continue to seek an amicable resolution
            to this
            situation. It is evaluating the current draft of the license agreement
            in view
            of the March 29th letter but is also taking into account a recent New
            York
            federal district court decision against the NYMEX that found under similar
            circumstances that NYMEX’s intellectual property rights, including those related
            to its settlement prices, were significantly limited. USOF and the General
            Partner have retained separate counsel to represent them in this
            matter.
  At
            this
            time, USOF is unable to determine what the outcome from this matter will
            be.
            There could be a number of consequences. Under the license agreement
            currently
            being negotiated, USOF would be required to pay a license fee to the
            New York
            Mercantile Exchange for the use of its settlement prices. Also, if the
            resolution or lack of resolution of this matter results in a material
            restriction on, or significant additional expense associated with, the
            use of
            the New York Mercantile Exchange’s oil futures contract settlement prices, USOF
            may be required to invest to a greater degree than currently anticipated
            in Oil
            Futures Contracts traded on commodity exchanges other than the New York
            Mercantile Exchange and Other Oil Interests. These or other consequences
            may
            adversely affect USOF’s ability to achieve its investment
            objective.
 47
 ***Others
            may also notify USOF of intellectual property rights that could adversely
            impact
            USOF.***
  Separately,
            Goldman, Sachs & Co. (“Goldman Sachs”) sent USOF a letter on March 17, 2006,
            providing USOF notice under 35 U.S.C. Section 154(d) of two pending United
            States patent applications, Publication Nos. 2004/0225593A1 and 2006/0036533A1.
            Both patent applications are generally directed to a method and system
            for
            creating and administering a publicly traded interest in a commodity
            pool. In
            particular, the Abstract of each patent application defines a means for
            creating
            and administering a publicly traded interest in a commodity pool that
            includes
            the steps of forming a commodity pool having a first position in a futures
            contract and a corresponding second position in a margin investment,
            and issuing
            equity interest of the commodity pool to third party investors. USOF
            Units are
            equity interests in a publicly traded commodity pool. In addition, USOF
            will
            directly invest in futures contracts and hold other investments to be
            used as
            margin for its future contract positions. If patents were to be
            issued
            to Goldman Sachs based upon these patent applications as currently drafted,
            and
            USOF continued to operate as currently contemplated after the patents
            were
            issued, claims against USOF and the General Partner for infringement
            of the
            patents may be made by Goldman Sachs. However, as these patent applications
            are
            pending and have not been substantively examined by the U.S. Patent and
            Trademark Office, it is uncertain at this time what subject matter will
            be
            covered by the claims of any patent issuing on one of these applications,
            should
            a patent issue at all.
  Under
            the
            provisions of 35 U.S.C. § 154(d), Goldman Sachs may seek damages in the form of
            a reasonable royalty from the date the Units are publicly offered for
            sale to
            the date one of their cited patent applications issues as a U.S. Patent
            if, and
            only if, the invention as claimed in the issued patent is substantially
            identical to the invention as claimed in the published patent application.
            To
            obtain a reasonable royalty under 35 U.S.C. § 154(d), one of Goldman Sachs’s
            patents must issue and then it must be proved that post-issuance acts
            or systems
            of USOF infringe a valid claim of the issued patent, and that the infringed
            claim is substantially identical to one of the claims in the corresponding
            published application. If at the time a Goldman Sachs patent issues,
            USOF does
            not infringe the claims of the issued patent based on its current design
            or
            through modifications made prior to issuance, or if any infringed issued
            claim
            is not substantially identical to a published claim, then Goldman Sachs
            will not
            be able to obtain a reasonable royalty under 35 U.S.C. § 154(d). At this time
            neither of Goldman Sachs’s patent applications have been substantively examined
            by an examiner at the U.S. Patent and Trademark Office nor are they currently
            being considered for examination on an expedited basis under a Petition
            to Make
            Special, and considering that both have been placed in Class 705 for
            examination, which has an average pendency of approximately 44-45 months
            to
            issuance (or abandonment) and an issuance rate of approximately 11% in
            2004, it
            is likely that neither application will issue within the next two years.
            Nonetheless, USOF currently is reviewing the Goldman Sachs published
            patent
            applications, and is engaged in discussions with Goldman Sachs regarding
            their
            pending applications and USOF’s own pending patent application. At this time,
            due in part to the requirements of 35 U.S.C. § 154(d) and the fact that the
            Goldman Sachs patent applications are pending and have not been issued
            as U.S.
            Patents, USOF is unable to determine what the outcome from this matter
            will be.
            See “Operating Risks — Third parties may infringe upon or otherwise violate
            intellectual property rights or assert that the General Partner has infringed
            or
            otherwise violated their intellectual property rights, which may result
            in
            significant costs and diverted attention.”


**Item 1B.**
            **Unresolved
                Staff Comments.**





Not
      applicable.





**Item 2.**
            **Properties.**





Not
      applicable.


48


**Item 3.**
            **Legal
                Proceedings.**




Although
      we may, from time to time, be involved in litigation arising out of our
      operations in the normal course
      of
      business or otherwise, we are currently not a party to any pending material
      legal proceedings, except for the items noted below.


***New
          York Mercantile Exchange***
  Representatives
          of the New York Mercantile Exchange have at various times asserted varying
          claims regarding USOF’s operations and the Exchange’s service marks and
          settlement prices of oil futures contracts traded on the Exchange.
  The
          New
          York Mercantile Exchange initially claimed that USOF’s use of the Exchange’s
          service marks would cause confusion as to USOF’s source, origin, sponsorship or
          approval, and constitute infringement of the Exchange’s trademark rights and
          unfair competition and dilution of the Exchange’s marks. In response to these
          claims, the General Partner changed USOF’s name. In addition, USOF expressly
          disclaims any association with the Exchange or endorsement of USOF by the
          Exchange and acknowledges that “NYMEX” and “New York Mercantile Exchange” are
          registered trademarks of such Exchange.
  The
          General Partner has also engaged in discussions with the New York Mercantile
          Exchange regarding a possible license agreement. In this regard, USOF
          received the March 29th Letter. The March 29th Letter was in response
          to USOF’s request for additional information in connection with the negotiation
          of the possible license agreement. In the March 29th Letter, the Exchange
          stated
          that it would cause the cessation of any market data vendor’s provision of New
          York Mercantile Exchange settlement prices to USOF and/or take other action
          to
          prevent USOF from using any New York Mercantile Exchange settlement prices
          unless USOF enters into a license agreement with the Exchange, or has indicated
          in writing that it will cease from using any Exchange settlement prices.
          USOF
          will continue to seek an amicable resolution to this situation. It is evaluating
          the current draft of the license agreement in view of the March 29th letter
          but
          is also taking into account a recent New York federal district court decision
          against the NYMEX that found under similar circumstances that NYMEX’s
          intellectual property rights, including those related to its settlement
          prices,
          were significantly limited. USOF and the General Partner have retained
          separate
          counsel to represent them in this matter.
  At
          this
          time, USOF is unable to determine what the outcome from this matter will
          be.
          There could be a number of consequences. Under the license agreement currently
          being negotiated, USOF would be required to pay a license fee to the New
          York
          Mercantile Exchange for the use of its settlement prices. Also, if the
          resolution or lack of resolution of this matter results in a material
          restriction on, or significant additional expense associated with, the
          use of
          the New York Mercantile Exchange’s oil futures contract settlement prices, USOF
          may be required to invest to a greater degree than currently anticipated
          in Oil
          Futures Contracts traded on commodity exchanges other than the New York
          Mercantile Exchange and Other Oil Interests. These or other consequences
          may
          adversely affect USOF’s ability to achieve its investment
          objective.
 49
 ***Goldman
          Sachs***
  Goldman,
          Sachs & Co. (“Goldman Sachs”) sent USOF a letter on March 17, 2006,
          providing USOF notice under 35 U.S.C. Section 154(d) of two pending United
          States patent applications, Publication Nos. 2004/0225593A1 and 2006/0036533A1.
          Both patent applications are generally directed to a method and system
          for
          creating and administering a publicly traded interest in a commodity pool.
          In
          particular, the Abstract of each patent application defines a means for
          creating
          and administering a publicly traded interest in a commodity pool that includes
          the steps of forming a commodity pool having a first position in a futures
          contract and a corresponding second position in a margin investment, and
          issuing
          equity interest of the commodity pool to third party investors. USOF Units
          are
          equity interests in a publicly traded commodity pool. In addition, USOF
          directly
          invests in futures contracts and hold other investments to be used as margin
          for
          its future contract positions. If patents were to be issued to Goldman
          Sachs
          based upon these patent applications as currently drafted, and USOF continued
          to
          operate as currently contemplated after the patents were issued, claims
          against
          USOF and the General Partner for infringement of the patents may be made
          by
          Goldman Sachs. However, as these patent applications are pending and have
          not
          been substantively examined by the U.S. Patent and Trademark Office, it
          is
          uncertain at this time what subject matter will be covered by the claims
          of any
          patent issuing on one of these applications, should a patent issue at
          all.
  Under
          the
          provisions of 35 U.S.C. § 154(d), Goldman Sachs may seek damages in the form of
          a reasonable royalty from the date the Units are publicly offered for sale
          to
          the date one of their cited patent applications issues as a U.S. Patent
          if, and
          only if, the invention as claimed in the issued patent is substantially
          identical to the invention as claimed in the published patent application.
          To
          obtain a reasonable royalty under 35 U.S.C. § 154(d), one of Goldman Sachs’s
          patents must issue and then it must be proved that post-issuance acts or
          systems
          of USOF infringe a valid claim of the issued patent, and that the infringed
          claim is substantially identical to one of the claims in the corresponding
          published application. If at the time a Goldman Sachs patent issues, USOF
          does
          not infringe the claims of the issued patent based on its current design
          or
          through modifications made prior to issuance, or if any infringed issued
          claim
          is not substantially identical to a published claim, then Goldman Sachs
          will not
          be able to obtain a reasonable royalty under 35 U.S.C. § 154(d). At this time
          neither of Goldman Sachs’s patent applications have been substantively examined
          by an examiner at the U.S. Patent and Trademark Office nor are they currently
          being considered for examination on an expedited basis under a Petition
          to Make
          Special, and considering that both have been placed in Class 705 for
          examination, which has an average pendency of approximately 44-45 months
          to
          issuance (or abandonment) and an issuance rate of approximately 11% in
          2004, it
          is likely that neither application will issue within the next two years.
          Nonetheless, USOF currently is reviewing the Goldman Sachs published patent
          applications, and is engaged in discussions with Goldman Sachs regarding
          their
          pending applications and USOF’s own pending patent application. At this time,
          due in part to the requirements of 35 U.S.C. § 154(d) and the fact that the
          Goldman Sachs patent applications are pending and have not been issued
          as U.S.
          Patents, USOF is unable to determine what the outcome from this matter
          will
          be.


**Item 4.**
            **Submission
                of Matters to a Vote of Security
                Holders.**





Not
      applicable.




**Part
        II**
 
 **Item 5.**
              **Market
                  for Registrant’s Common Equity, Related Stockholder Matters and Issuer
                  Purchases of Equity
                  Securities.**
  **Price
          Range of Units**
  USOF’s
          units have traded on the American Stock Exchange (“AMEX”) under the symbol “USO”
since its initial public offering on April 10, 2006. The following table
          sets
          forth the range of reported high and low sales prices of the units as reported
          on AMEX for the period of April 10, 2006 through December 31, 2006
  **High**
                
                **Low**Fiscal
                    year 2006Second
                    quarter (beginning April 10, 2006)
                
                $
                73.23
                
                $
                64.89Third
                    quarter
                
                $
                74.60
                
                $
                54.06Fourth
                    quarter
                
                $
                56.90
                
                $
                50.25
  As
          of
          December 31, 2006, we had 27,995 holders of units.


50


**D** **ividends**


USOF
        has
        not made and does not intend to make cash distributions to its unitholders.
 
 **Issuer
        Purchases of Equity Securities**
  USOF
        does
        not purchase units directly from its unitholders; however, in connection
        with
        its redemption of baskets held by Authorized Purchasers, USOF redeemed 350
        baskets (comprising 13,500,000 units) during the period of April 10, 2006
        to
        December 31, 2006.


**Item 6.**
            **Selected
                Financial Data.**





*Financial
      Highlights (for the period from April 10, 2006 to December 31,
      2006)*


*(Dollar
      amounts in 000’s except for Loss per unit)*




Total
                  assets
              
              $
              804,349Net
                  realized and unrealized loss on futures transactions, inclusive
                  of
                  commissions
              
              $
              (138,926
              )Net
                  loss
              
              $
              (126,349
              )Weighted-average
                  limited partnership units
              
              
              7,018,797Net
                loss per unit
              
              $
              (15.52
              )Net
                  loss per weighted average unit
              
              $
              (18.00
              )Net
                  cash flows
              
              $
              712,884


51


**Item 7.**
            **Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operation.**




The
      following discussion should be read in conjunction with our consolidated
      financial statements and the notes thereto included elsewhere in this Form
      10-K.


*Forward-Looking
          Information*
  This
        Form
        10-K contains forward-looking statements regarding the plans and objectives
        of
        management for future operations. This information may involve known and
        unknown
        risks, uncertainties and other factors which may cause our actual results,
        performance or achievements to be materially different from future results,
        performance or achievements expressed or implied by any forward-looking
        statements. Forward-looking statements, which involve assumptions and describe
        our future plans, strategies and expectations, are generally identifiable
        by use
        of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,”
“believe,” “intend” or “project” or the negative of these words or other
        variations on these words or comparable terminology. These forward-looking
        statements are based on assumptions that may be incorrect, and we cannot
        assure
        investors that these projections included in these forward-looking statements
        will come to pass. Our actual results could differ materially from those
        expressed or implied by the forward-looking statements as a result of various
        factors.
  We
        have
        based the forward-looking statements included in this annual report on Form
        10-K
        on information available to us on the date of this annual report on Form
        10-K,
        and we assume no obligation to update any such forward-looking statements.
        Although we undertake no obligation to revise or update any forward-looking
        statements, whether as a result of new information, future events or otherwise,
        investors are advised to consult any additional disclosures that we may make
        directly to them or through reports that we in the future may file with the
        SEC,
        including annual reports on Form 10-K, quarterly reports on Form 10-Q and
        current reports on Form 8-K. Except
        for historical information contained herein, this “Management’s Discussion and
        Analysis of Financial Condition and Results of Operations” contains
        forward-looking statements that involve known and unknown risks and
        uncertainties that may cause our actual results or outcome to be materially
        different from any future results, performance or achievements expressed
        or
        implied by such forward-looking statements.
 **Introduction**
 
 USOF,
          a
          Delaware limited partnership, is a commodity pool that issues units that
          may be purchased and sold on the American Stock Exchange. The investment
          objective of USOF is for changes in percentage terms of the units’ NAV on a
          daily basis to reflect the changes in percentage terms in the spot price of
          WTI light, sweet crude oil delivered to Cushing, Oklahoma, also on a daily
          basis, less USOF’s expenses.
 
 USOF
          seeks to achieve its investment objective by investing in a combination
          of oil
          futures contracts and other oil interests such that changes in USOF’s NAV,
          measured in percentage terms, will closely track the changes in
          the Benchmark Oil Futures Contract, also measured in percentage terms.
          USOF’s General Partner believes the Benchmark Oil Futures Contract historically
          exhibited a close correlation with the spot price of WTI light, sweet crude
          oil.
 At
          present, on any valuation day the Benchmark Oil Futures Contract is the
          near
          month futures contract for WTI light, sweet crude oil traded on the New
          York
          Mercantile Exchange unless the near month contract will expire within two
          weeks
          of the valuation day, in which case the Benchmark Oil Futures Contract
          is the
          next month contract for WTI light, sweet crude oil traded on the New York
          Mercantile Exchange. “Near month contract” means the next contract traded on the
          New York Mercantile Exchange due to expire; “next month contract” means the
          first contract traded on the New York Mercantile Exchange due to expire
          after
          the near month contract.
  USOF
            may
            also invest in futures contracts for other types of crude oil, heating
            oil,
            gasoline, natural gas, and other petroleum-based fuels that are traded
            on the
            New York Mercantile Exchange or other U.S. and foreign exchanges (collectively,
            “Oil Futures Contracts”) and other oil interests such as cash-settled options on
            Oil Futures Contracts, forward contracts for oil, and over-the-counter
            transactions that are based on the price of oil, other petroleum-based
            fuels,
            Oil Futures Contracts and indices based on the foregoing (collectively,
“Other
            Oil Interests”). The General Partner of USOF, Victoria Bay Asset Management,
            LLC, which is registered as a commodity pool operator, is authorized by
            the LP Agreement to manage USOF. The General Partner is authorized by USOF
            in its sole judgment to employ, establish the terms of employment for,
            and
            terminate commodities trading advisors or futures commission
            merchants.
 52
 **Valuation
        of Crude Oil Futures Contracts and the Computation of the
        NAV**
 The
          NAV
          of USOF units is calculated once each trading day as of the earlier of
          the close
          of the New York Stock Exchange or 4:00 p.m.
          New York time. The NAV for a particular trading day is released after
          4:15 p.m. New York time. Trading
          on the American Stock Exchange typically closes at 4:15 p.m. New York time.
          USOF uses the New York Mercantile Exchange closing price (determined at
          the
          earlier of the close of that exchange or 2:30 p.m. New York time) for the
          contracts held on the New York Mercantile Exchange, but calculates or determines
          the value of all other USOF investments as of the earlier of the close
          of the
          New York Stock Exchange or 4:00 p.m. New York time.
  **Management’s
          Discussion of Results of Operation and the Crude Oil
          Market**
 
 *Results
          of Operations.*  On
          April
          10, 2006, USOF listed its Units on the American Stock Exchange under the
          ticker
          symbol “USO.” On that day USOF established its initial offering price at $67.39
          per unit and issued 200,000 Units to the initial Authorized Purchaser,
          KV
          Execution Services LLC, in exchange for $13,478,000 in cash. USOF also
          commenced
          investment operations on that day by purchasing oil futures contracts traded
          on
          the New York Mercantile Exchange that are based on WTI light, sweet crude
          oil.
          The total market value of the crude oil futures contracts purchased on
          that day
          was $13,418,501 at the time of purchase. USOF established cash deposits
          equal to
          $13,478,000 at the time of the initial sale of Units. The ending NAV on
          the
          first day of operations was $67.93. The majority of those cash assets were
          held
          at USOF’s custodian bank while less than 10% of the cash balance was held as
          margin deposits with USOF’s futures commission merchant relating to the Oil
          Futures Contracts purchased.
 
 *Portfolio
          Expenses* .
          USOF’s
          expenses consist of investment management fees and commissions. The investment
          advisory fee that USOF pays to the General Partner is calculated as a percentage
          of the total net assets of USOF. For total net assets of up to $1 billion,
          the
          investment advisory fee is 0.5%. For assets over $1 billion, the investment
          advisory fee is 0.2% on the incremental amount of assets. During the period
          from
          April 10, 2006 to December 31, 2006, the daily average total net assets
          of the
          USOF were approximately $400,799,633. At no time during 2006, did the total
          net
          assets of USOF exceed $1 billion. The investment advisory fee paid by USOF
          amounted to $1,460,448, which was calculated at the 0.50% rate and accrued
          daily.
 
 USOF
          also
          incurs commissions to brokers for the purchase and sale of futures contracts,
          other oil interests, or Treasuries. During 2006, total commissions paid
          amounted to $478,713. Prior to the initial offering, USOF had estimated
          that the
          annual level of such commissions for USOF was expected to be 0.35% of total
          net
          assets. As an annualized percentage of total net assets, the actual figures
          for
          2006 represents approximately 0.16% of total net assets. However, there
          can be
          no assurance that commission costs and portfolio turnover will not cause
          commission expenses to rise in future quarters.
 Expenses
          incurred from inception through December 31, 2006 in connection with organizing
          USOF and the initial offering costs of the units were borne by the General
          Partner, and are not subject to reimbursement by USOF.
  *Interest
            Income* .
            USOF
            seeks to invest its assets such that it holds crude oil futures contracts
            and
            other oil interests in an amount equal to the total net assets of the
            portfolio.
            Typically, such investments do not require USOF to pay the full amount
            of the
            contract value at the time of purchase, but rather require USOF to post
            an
            amount as a margin deposit against the eventual settlement of the contract.
            As a
            result, USOF retains an amount that is approximately equal to its total
            net
            assets, which USOF invests in cash deposits or in Treasuries. This includes
            both
            the amount on deposit with the futures brokerage firms as margin as well
            as
            unrestricted cash held with USOF’s custodian bank. The cash or Treasuries earn
            interest that accrues on a daily basis. For 2006, USOF earned $13,930,431
            in
            interest income on such cash holdings. Based on USOF’s average daily total net
            assets, this is equivalent to an annualized yield of 4.77%. USOF did
            not
            purchase Treasuries during 2006 and held all of its funds in cash or cash
            equivalents during this time period.
 53
 *Tracking
          USOF’s Benchmark* .
          USOF
          seeks to manage its portfolio such that changes in its average daily NAV,
          on a
          percentage basis, closely track changes in the average daily price of the
          Benchmark Oil Futures Contract, also on a percentage basis. Specifically,
          USOF
          seeks to manage the portfolio such that over any rolling 30-day period,
          the
          average daily change in the NAV is within a range of 90% to 110% (0.9 to
          1.1),
          of the average daily change of the Benchmark Oil Futures Contract. As an
          example, if the average daily movement of the Benchmark Oil Futures Contract
          for
          a particular 30-day time period was 0.5% per day, USOF management would
          attempt
          to manage the portfolio such that the average daily movement of the NAV
          during
          that same time period fell between 0.45% and 0.55% ( *i.e* .,
          between 0.9 and 1.1 of the benchmark’s results). USOF’s portfolio management
          goals do not include trying to make the nominal price of USOF’s NAV equal to the
          nominal price of the current Benchmark Oil Futures Contract. Management
          believes
          that it is not practical to manage the portfolio to achieve such an investment
          goal when investing in listed crude oil futures contracts.
 
 For
          the
          30 valuation days ending December 31, 2006, the simple average daily change
          in
          the Benchmark Oil Futures Contract was -0.004 %, while the simple average
          daily
          change in the NAV of USOF 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 NAV was 3%, meaning
          that
          over this time period USOF’s tracking error was within the plus or minus 10%
          range established as its benchmark tracking goal.
 
 
 54
 Since
          the
          offering of USOF units to the public on April 10, 2006, the simple average
          daily change in the Benchmark Oil Futures Contract was -0.131%, while the
          simple
          average daily change in the NAV of USOF over the same time period was-
          0.138%.
          The average daily difference was 0.007% (or .7 basis point, where 1 basis
          point
          equals 1/100 of 1%). As a percentage of the daily movement of the benchmark
          contract, the average error in daily tracking by the NAV was 3%, meaning
          that
          over this time period USOF’s tracking error was within the plus or minus 10%
          range established as its benchmark tracking goal.
 
 An
          alternative tracking measurement of the return performance of USOF versus
          the
          return of its benchmark can be calculated by comparing the actual return
          of
          USOF, measured by changes in its NAV, versus the *expected* changes
          in its NAV under the assumption that USOF’s returns had been exactly the same as
          the daily changes in its benchmark. As a point of reference, USOF commenced
          operations on April 10 ,
          2006
          with the June 2006 crude oil contract as its Benchmark Oil Futures Contract.
          USOF ended 2006 with the February 2007 crude oil contract as its Benchmark
          Oil
          Futures Contract .
 
 For
          the
          period April 10, 2006 through December 31, 2006, the actual total return
          of USOF
          as measured by changes in its NAV was -23.03%. This is based on initial
          NAV of $67.39 on April 10 and an ending NAV as of December 31 of $51.87
          (during this time period USOF made no distributions to its unitholders).
          However, if USOF’s daily changes in its NAV had instead exactly tracked the
          changes in the daily return of the Benchmark Oil Futures Contracts, USOF
          would
          have ended 2006 with an estimated NAV of $50.61, for a total return over
          the
          relevant time period of -24.90%. The difference between the actual NAV
          total
          return of USOF of -23.03% and the expected total return based on the Benchmark
          Oil Futures Contracts of -24.90 % was an error over the time period of
          +1.87%,
          which is to say that USOF’s actual total return exceeded the benchmark result by
          that percentage. Management believes that the majority of the difference
          between
          the actual return and the expected benchmark return can be attributed to
          the
          impact of the interest that USOF collects on its cash and cash equivalent
          holdings. In addition, during the period USOF also collected fees from
          brokerage
          firms creating or redeeming baskets of units. This income also contributed
          to
          USOF’s actual return exceeding the benchmark results. However, if the total
          assets of USOF continue to increase, management believes that the impact
          on
          total returns of these fees from creations and redemptions will diminish
          as a
          percentage of the total return.
  Of
          the
          various factors that could impact USOF’s ability to accurately track its
          benchmark, there are currently three factors that have, during the latest
          period, or are most likely to impact in the future, these tracking results.
 
 The
          first
          major factor that could affect tracking results is if USOF buys or sells
          its
          holdings in the then current Benchmark Oil Futures Contract at a price
          other
          than the closing settlement price of that contract on the day in which
          USOF
          executes the trade. In that case, USOF may get a price that is higher,
          or lower,
          than that of the Benchmark Oil Futures Contract, which, if such transactions
          did
          occur, could cause the changes in the daily NAV of USOF to either be too
          high or
          too low relative to the changes in the daily benchmark. In 2006, management
          attempted to minimize the effect of these transactions by seeking to execute
          its
          purchase or sales of the Benchmark Oil Futures Contracts at, or as close
          as
          possible to, the end of the day settlement price. However, it is not always
          possible for USOF to obtain the closing settlement price and there is no
          assurance that failure to obtain the closing settlement price in the future
          will
          not adversely impact USOF’s attempt to track its benchmark over
          time.
  The
            second major factor that could affect tracking results is the interest that
            USOF earns on its cash and Treasury holdings. USOF is not required to
            distribute any portion of its income to its unit holders and did not
            make any
            distribution to unitholders in 2006. Interest payments, and any other
            income,
            were retained within the portfolio and added to USOF’s NAV. When this income
            exceeds the level of USOF’s expenses for its investment advisory fee and its
            brokerage commissions, USOF will realize a net yield that will tend to
            cause
            daily changes in the NAV of USOF to track slightly higher than daily
            changes in
            the Benchmark Oil Futures Contracts. During 2006, USOF earned on an annualized
            basis approximately 4.77% on its cash holdings. It also incurred cash
            expenses
            on an annualized basis of .5% for investment advisory fees and approximately
            .16% in brokerage commission costs related to the purchase and sale of
            futures
            contracts. The foregoing fees and expenses resulted in a net yield on
            an
            annualized basis of approximately 4.1% affected USOF’s ability to track its
            benchmark. If short-term interest rates rise above the current levels,
            the level
            of deviation created by the yield would increase. Conversely, if short-term
            interest rates were to decline, the amount of error created by the yield
            would
            decrease. If short term yields drop to a level lower than the combined
            expenses
            of the investment advisory fee and the brokerage commissions, then the
            tracking
            error would become a negative number and would tend to cause the daily
            returns
            of the NAV to underperform the daily returns of the benchmark crude oil
            futures
            contracts.
 55
 The
          third
          major factor affecting tracking results is if USOF holds oil related investments
          in its portfolios other than the current Benchmark Oil Futures Contract
          that
          fail to closely track the Benchmark Oil Futures Contract's total return
          movements. In that case, the error in tracking the benchmark can result
          in daily
          changes in the NAV of USOF that are either too high, or too low, relative
          to the
          daily changes in the benchmark. During 2006 USOF did not hold any oil related
          investments other than the then current Benchmark Oil Futures Contract.
          However,
          there can be no assurance that in future quarters USOF will not make use
          of such
          non-benchmark oil related investments.
 
 *Crude
          oil market.* During the period from April 10, 2006 to December 31, 2006,
          crude oil prices were impacted by several factors. On the consumption side
          demand remained strong as continued global economic growth, especially
          in
          emerging economies such as China and India, remained brisk. On the supply
          side,
          production remained steady despite concerns about the possible negative
          impact
          of hurricanes in the U.S. Gulf Coast area and violence impacting production
          in
          Iraq and Nigeria. During the latter part of 2006, the oil producing portions
          of
          the Gulf Coast were not subject to a repeat of 2005’s disastrous storms. In
          addition, although the crude oil market’s concerns about geo-political issues
          regarding other key crude oil producing countries, such as Iran and Venezuela,
          remained, such concerns appear to have moderated at least in the short
          term. As
          a result of the foregoing, although crude oil prices trended initially
          higher
          from April 10 until mid-July 2006, over the course of rest of the third
          and
          fourth quarters prices fell sharply and showed periods of greater than
          usual
          volatility. Crude oil prices finished 2006 at lower levels than where they
          were
          in April 2006 when USOF commenced operations.
 
 *Term
          Structure of Crude Oil Futures Prices and the impact on total returns.*Several factors determine the total return from investing in a futures
          contract position. One factor that impacts the total return that will result
          in
          investing in near month crude oil futures contracts and “rolling” those
          contracts forward each month is the price relationship between the current
          near
          month contract and the next month contract. If the price of near month
          contract
          is higher than the next month contract (a situation referred to as
“backwardation” in the futures market), then absent any other change there is a
          tendency for the price of a next month contract to rise in value as it
          becomes
          the near month contract and approaches expiration. Conversely, if the price
          of a
          near month contract is lower than the next month contract (a situation
          referred
          to as “contango” in the futures market), than absent any other change there is a
          tendency for the price of a next month contract to decline in value as
          it
          becomes near month contract and approaches expiration.
  As
            an
            example, assume that the price of crude oil for immediate delivery (the
“spot”
price), was $50 per barrel, and the value of a position in the near month
            futures contract was also $50. Over time the price of the barrel of crude
            oil
            will fluctuate up and down based on a number of market factors, including
            demand
            for oil relative to its supply. The value of the near month contract
            will
            likewise fluctuate up and down in reaction to a number of market factors.
            If
            investors seeks to maintain their holding in a near month contract position
            and
            not take delivery of the oil, every month they must sell their current
            near
            month as it approaches expiration and invest in the next month contract.
 
 If
            the
            futures market is in backwardation, e.g., when the expected price of
            oil in the
            future would be less, the investor would be buying next month contracts
            for a
            lower price than the current near month contract. Hypothetically, and
            assuming
            no other changes to either prevailing crude oil prices or the price relationship
            between the spot price, the near month contract and the next month contract
            (and
            ignoring the impact of commission costs and the interest earned on cash),
            the
            value of the next month contract would rise as it approaches expiration
            and
            becomes the new near month contract. In this example, the value of the
            $50
            investment would tend to rise faster than the spot price of crude oil,
            or fall
            slower. As a result, it would be possible in this hypothetical example
            for the
            price of spot crude oil to have risen to $60 after some period of time,
            while
            the value of the investment in the futures contract will have risen to
            $65,
            assuming backwardation is large enough or enough time has elapsed. Similarly,
            the spot price of crude oil could have fallen to $40 while the value
            of an
            investment in the futures contract could have fallen to only $45. Over
            time if
            backwardation remained constant the difference would continue to
            increase.
 
 If
            the
            futures market is in contango, the investor would be buying next month
            contracts
            for a higher price than the current near month contract. Hypothetically,
            and
            assuming no other changes to either prevailing crude oil prices or the
            price
            relationship between the spot price, the near month contract and the
            next month
            contract (and ignoring the impact of commission costs and the interest
            earned on
            cash), the value of the next month contract would fall as it approaches
            expiration and becomes the new near month contract. In this example,
            it would
            mean that the value of the $50 investment would tend to rise slower than
            the
            spot price of crude oil, or fall faster. As a result, it would be possible
            in
            this hypothetical example for the price of spot crude oil to have risen
            to $60
            after some period of time, while the value of the investment in the futures
            contract will have risen to only $55, assuming contango is large enough
            or
            enough time has elapsed. Similarly, the spot price of crude oil could
            have
            fallen to $45 while the value of an investment in the futures contract
            could
            have fallen to $50. Over time if contango remained constant the difference
            would
            continue to increase.
 56
 Historically
            the futures oil markets have experienced periods of contango and backwardation,
            with backwardation being in place more often than contango. During the
            past two
            years, including 2006, these markets have experienced contango. This
            has
            impacted the total return on an investment in USOF units during the past
            year
            relative to a hypothetical direct investment in crude oil. For example an
            investment made in USOF units on April 10 and held to December 31, 2006
            decreased, based upon the changes in the closing market prices for USOF
            units on
            those days, by 23.03%, while the spot price of crude oil for immediate
            delivery
            during the same period decreased 11.18% (note: this comparison ignores
            the
            potential costs associated with physically owning and storing crude oil).
            However, the investment objective of USOF is not to have the market price
            of its
            units match, dollar for dollar, changes in the spot price of oil, or
            changes in
            the price of the Benchmark Contract. This period of contango did not
            meaningfully impact USOF’s investment objective of having percentage changes in
            its per unit price track percentage changes in the price of the Benchmark
            Contract since the impact of backwardation and contango tended to equally
            impact
            the percentage changes in price of both USOF’s units and the Benchmark
            Contract. It is impossible to predict with any degree of certainty whether
            backwardation or contango will occur in the future. It is likely that
            both
            conditions will occur during different periods.
  **Subsequent
          Events**
 
 On
          January 30 ,
          2007, USOF
          had a follow-on public offering of its units declared effective by the U.S.
          Securities and Exchange Commission. The primary purpose of that filing
          was to
          register an additional 50,000,000 units for sale.  This offering was
          combined with the registration statement on Form S-1 dated October 18,
          2006 and
          included several changes in language and procedure.
 
 **Critical
          Accounting Policies**
 
 Preparation
          of the financial statements and related disclosures in compliance with
          accounting principles generally accepted in the United States of America
          requires the application of appropriate accounting rules and guidance,
          as well
          as the use of estimates. USOF's application of these policies involves
          judgments
          and actual results may differ from the estimates used. The General Partner
          has
          evaluated the nature and types of estimates that it makes in preparing
          USOF's financial statements and related disclosures and has determined that
          the valuation of its investments which are not traded on a United States
          or
          internationally recognized futures exchange (such as forward contracts
          and
          over-the-counter contracts) involves a critical accounting policy. While
          not
          currently applicable given the fact that during the time period covered
          by this
          report, USOF was not investing in futures contracts not traded on a United
          States futures exchange to the extent USOF makes such investments in the
          future,
          the values used by USOF for its forward contracts will be provided by its
          commodity broker who uses market prices when available, while over-the-counter
          contracts will be valued based on the present value of estimated future
          cash
          flows that would be received from or paid to a third party in settlement
          of
          these derivative contracts prior to their delivery date and valued on a
          daily
          basis.
 
 **Liquidity
          and Capital Resources**
 
 USOF
          does
          not anticipate making use of borrowings or other lines of credit to meet
          its
          obligations. USOF has met, and it is anticipated that USOF will continue
          to
          meet, its liquidity needs in the normal course of business from the proceeds
          of
          the sale of its investments or from cash and/or short-term Treasuries that
          it intends to hold at all times. USOF’s liquidity needs include: redeeming
          units, providing margin deposits for its existing oil futures contracts
          or the
          purchase of additional crude oil futures contracts and posting collateral
          for
          its over-the-counter contracts and payment of its expenses, summarized
          below
          under “Contractual Obligations.”
 
 USOF
          currently generates cash primarily from (i) the sale of Creation Baskets
          and
          (ii) interest earned on cash. USOF has allocated substantially all of its
          nets
          assets to trading in oil interests. A significant portion of the NAV was
          held in
          cash that was used as margin for USOF's trading in oil interests. Cash
          or Treasuries as a percentage of the total net assets vary from period to
          period as the market values of the oil interests change. The balance of
          the net
          assets is held in USOF's Oil Futures Contracts and Other Oil Interests
          trading
          account. Interest earned on USOF's interest bearing-funds is paid to
          USOF.
 57
 USOF's
          investment in oil interests may be subject to periods of illiquidity because
          of
          market conditions, regulatory considerations and other reasons. For example,
          commodity exchanges limit the fluctuations in Oil Futures Contracts prices
          during a single day by regulations referred to as “daily limits.” During a
          single day, no trades may be executed at prices beyond the daily limit.
          Once the
          price of an Oil Futures Contract has increased or decreased by an amount
          equal
          to the daily limit, positions in the contracts can neither be taken or
          liquidated unless the traders are willing to effect trades at or within
          the
          limit. Such market conditions could prevent USOF from promptly liquidating
          its
          positions in Oil Futures Contracts. During 2006, USOF was not forced to
          liquidate any of its positions as a result of daily limits; however, USOF
          cannot
          predict whether such an event may occur in the future. To date, all of
          USOF's
          and the General Partner's expenses have been funded by their affiliates.
          Neither
          USOF nor the General Partner have any obligation or intention to refund
          such
          payments by their affiliates. These affiliates are under no obligation
          to
          continue payment of USOF's or the General Partner's expenses. If such affiliates
          were to discontinue the payment of these expenses and the General Partner
          and
          USOF are unsuccessful in raising sufficient funds to cover USOF's expenses
          or in
          locating any other source of funding, USOF will terminate and investors
          may lose
          all or part of their investment.
  **Market
          Risk**
 
 Trading
          in Oil Futures Contracts and Other Oil Interests, such as
          forwards, involves USOF entering into contractual commitments to purchase
          or sell oil at a specified date in the future. The gross or face amount
          of
          the contracts will significantly exceed USOF's future cash requirements
          since USOF intends to close out its open positions prior to settlement.
          As a
          result, USOF is generally only subject to the risk of loss arising
          from the change in value of the contracts. USOF considers the "fair value''
          of
          its derivative instruments to be the unrealized gain or loss on the contracts.
          The market risk associated with USOF's commitments to purchase oil is limited
          to
          the gross face amount of the contacts held. However, should USOF enter
          into a
          contractual commitment to sell oil, it would be required to make delivery
          of the
          oil at the contract price, repurchase the contract at prevailing prices
          or
          settle in cash. Since there are no limits on the future price of oil, the
          market
          risk to USOF could be unlimited. USOF's exposure to market risk depends on
          a number of factors including the markets for oil, the volatility of interest
          rates and foreign exchange rates, the liquidity of the Oil Futures Contracts
          and
          Other Oil Interests markets and the relationships among the contracts held
          by
          USOF. The limited experience that USOF has in utilizing its model to trade
          in oil interests in a manner intended to track the spot price of oil, as
          well as
          drastic market occurrences, could ultimately lead to the loss of all or
          substantially all of an investor’s capital.
  **Credit
          Risk**
 
 When
          USOF
          enters into Oil Futures Contracts and Other Oil Interests, it is exposed
          to the
          credit risk that the counterparty will not be able to meet its obligations.
          The
          counterparty for the Oil Futures Contracts traded on the New York Mercantile
          Exchange and on most other f utures
          exchanges is the clearinghouse associated with the particular exchange.
          In
          general, clearinghouses are backed by their members who may be required
          to share
          in the financial burden resulting from the nonperformance of one of their
          members and therefore, this additional member support should significantly
          reduce credit risk. Some foreign exchanges are not backed by their clearinghouse
          members but may be backed by a consortium of banks or other financial
          institutions. During the period ended December 31, 2006, the only foreign
          exchange we made on investments of oil interests was the ICE Futures. There
          can
          be no assurance that any counterparty, clearinghouse, or their members
          or
          financial backers would satisfy their obligations to USOF in such circumstances.
          The General Partner attempts to manage the credit risk of USOF by following
          various trading limitations and policies. In particular, USOF posts margin
          and/or holds liquid assets that are approximately equal to the face amount
          of
          its obligations to counterparties under the Oil Futures Contracts and Other
          Oil
          Interests it holds. The General Partner has implemented procedures that
          include,
          but are not limited to, executing and clearing trades only with creditworthy
          parties and/or requiring the posting of collateral or margin by such parties
          for
          the benefit of USOF to limit its credit exposure. UBS Securities LLC, USOF's
          commodity broker, or any other broker that may be retained by USOF in the
          future, when acting as USOF's futures commission merchant in accepting
          orders to
          purchase or sell Oil Futures Contracts on United States exchanges,
          is required by CFTC regulations to separately account for and
          segregate as belonging to USOF, all assets of USOF relating to domestic
          Oil
          Futures Contracts trading. These commodity brokers are not allowed to commingle
          USOF's assets with their other assets. In addition, the CFTC requires commodity
          brokers to hold in a secure account the USOF assets related to foreign
          Oil
          Futures Contracts trading.
 
 **Off
          Balance Sheet Financing**
 
 As
          of
          December 31, 2006, USOF has no loan guarantee, credit support or other
          off-balance sheet arrangements of any kind other than agreements entered
          into in
          the normal course of business, which may include indemnification provisions
          relating to certain risks that service providers undertake in performing
          services that are in the best interests of USOF. While USOF's exposure
          under
          these indemnification provisions cannot be estimated, they are not expected
          to
          have a material impact on USOF's financial position.
 58
 **Redemption
          Basket Obligation**
 
 In
          order
          to meet its investment objective and pay its contractual obligations described
          below, USOF requires liquidity to redeem Redemption Baskets. USOF has
          satisfied this obligation through the sale of its Treasuries or cash in
          an
          amount proportionate to the number of Units being redeemed.
  **Contractual
          Obligations**
 
 USOF's
          primary contractual obligations are with the General Partner. In return
          for its
          services, the General Partner is entitled to a management fee calculated
          as a
          fixed percentage of USOF's NAV, currently .50% for an NAV of $1 billion
          or less,
          and thereafter .20% of the NAV above $1 billion. The General Partner or
          its
          affiliate has agreed to pay the start-up costs associated with the formation
          of
          USOF, primarily its legal, accounting and other costs in connection with
          its
          registration with the CFTC as a commodity pool operator and the registration
          and
          listing of USOF with the SEC and the American Stock Exchange, respectively.
          However, certain costs of registering and listing additional shares of
          USOF with
          the SEC may be directly borne in the future by USOF, and not by the General
          Partner, if the General Partner determines that such costs are no longer
          part of
          the start-up costs of USOF and instead are part of the ordinary on-going
          costs
          of USOF.
 
 The
          General Partner has agreed to pay the fees of the custodian and transfer
          agent,
          Brown Brothers Harriman & Co., as well as Brown Brothers Harriman &
Co.'s fees for performing administrative services, including in connection
          with
          USOF's preparation of its financial statements and its SEC and CFTC reports.
          The
          General Partner will also pay the fees of USOF's accountants and a separate
          firm
          for providing tax related services, as well as those of USOF's marketing
          agent,
          ALPS Distributors, Inc. The General Partner is also in the process of
          negotiating a licensing agreement with the New York Mercantile Exchange
          under
          which certain licensing fees will be paid to the exchange by USOF.
 
 In
          addition to the General Partner's management fee, USOF pays its brokerage
          fees,
          over-the-counter dealer spreads, fees to the Broker (or any other Futures
          Clearing Merchant that the General Partner may elect to use for execution
          or
          clearing of futures trades), and extraordinary expenses. The latter are
          expenses
          not in the ordinary course of its business, including the indemnification
          of any
          person against liabilities and obligations to the extent permitted by law
          and
          under the LP Agreement, the bringing or defending of actions in law or
          in equity
          or otherwise conducting litigation and incurring legal expenses and the
          settlement of claims and litigation. Commission payments to the Broker
          or any
          other Futures Clearing Merchant are on a contract-by-contract, or round
          turn,
          basis.
 
 The
          parties cannot anticipate the amount of payments that will be required
          under
          these arrangements for future periods, as USOF's NAVs and trading levels
          to meet
          its investment objectives will not be known until a future date. These
          agreements are effective for a specific term agreed upon by the parties
          with an
          option to renew, or, in some cases, are in effect for the duration of USOF's
          existence. The parties may terminate these agreements earlier for certain
          reasons listed in the agreements.


59


**Item
          7A.**  ***Quantitative
          and Qualitative Disclosure About Market Risk***




***Over-the-Counter
        Derivatives (Including Spreads and Straddles)***
 In
          the
          future USOF may purchase over-the-counter contracts. Unlike most of the
          exchange-traded oil futures contracts or exchange-traded options on such
          futures, each party to such contract bears the credit risk that the other
          party
          may not be able to perform its obligations under its contract.
  Some
          oil-based derivatives transactions contain fairly generic terms and conditions
          and are available from a wide range of participants. Other oil-based derivatives
          have highly customized terms and conditions and are not as widely available.
          Many of these over-the-counter contracts are cash-settled forwards for
          the
          future delivery of oil- or petroleum-based fuels that have terms similar
          to the
          Oil Futures Contracts. Others take the form of “swaps” in which the two parties
          exchange cash flows based on pre-determined formulas tied to the price
          of the
          crude oil spot, or forward crude oil prices, or crude oil futures prices.
          For
          example, USOF may enter into over-the-counter derivative contracts whose
          value
          will be tied to changes in the difference between the WTI spot price, the
          price
          of Oil Futures Contract traded on New York Mercantile Exchange and the
          prices of
          other Oil Futures Contracts that may be invested in by USOF.
  To
          protect itself from the credit risk that arises in connection with such
          contracts, USOF may enter into agreements with each counterparty that provide
          for the netting of its overall exposure to its counterparty, such as the
          agreements published by the International Swaps and Derivatives Association,
          Inc. USOF also may require that the counterparty be highly rated and/or
          provide collateral or other credit support to address USOF’s exposure to the
          counterparty.
  USOF
          may
          employ spreads or straddles in its trading to mitigate the differences
          in its
          investment portfolio and its goal of tracking the price of the Benchmark
          Oil
          Futures Contract. USOF would use a spread when it chooses to take simultaneous
          long and short positions in futures written on the same underlying asset,
          but
          with different delivery months. The effect of holding such combined positions
          is
          to adjust the sensitivity of USOF to changes in the price relationship
          between
          futures contracts which will expire sooner and those that will expire later.
          USOF would use such a spread if the General Partner felt that taking such
          long
          and short positions, when combined with the rest of its holdings, would
          more
          closely track the investment goals of USOF, or the General Partner felt
          if it
          would lead to an overall lower cost of trading to achieve a given level
          of
          economic exposure to movements in oil prices. USOF would enter into a straddle
          when it chooses to take an option position consisting of a long (or short)
          position in both a call option and put option. The economic effect of holding
          certain combinations of put options and call options can be very similar
          to that
          of owning the underlying futures contracts. USOF would make use of such
          a
          straddle approach if, in the opinion of the General Partner, the resulting
          combination would more closely track the investment goals of USOF or if
          it would
          lead to an overall lower cost of trading to achieve a given level of economic
          exposure to movements in oil prices.
  During
            the period ended December 31, 2006, USOF did not employ any hedging methods
            since all of its investments were made over an exchange. Therefore, USOF
            was not
            exposed to counterparty risk.


60


**Item 8.**
            **Financial
                Statements and Supplementary
                Data.**


**Index
          to Financial Statements**
  **Documents**
                
                **Page**Report
                    of Independent Registered Public Accounting
                    Firm
                
                
                62Statements
                    of Financial Condition at December 31, 2006 and
                    2005
                
                
                63Schedule
                  of Investments at December 31, 2006
                
                
                64Statements
                    of Operations for the period from (April 10,
                    2006) commencement of operations to December 31, 2006 and the period
                    from (May 12, 2005) inception to December 31, 2005
                
                
                65Statements
                  of Changes in Partners' Capital for the period
                  from (April 10, 2006) commencement of operations to December 31,
                  2006 and
                  the period from (May 12, 2005) inception to December
                  31, 2005
                
                
                66Statements
                    of Cash Flows for the period from (April 10,
                    2006) commencement of operations to December 31, 2006 and the
                    period
                    from (May 12, 2005) inception to December
                    31, 2005
                
                
                67Notes
                    to Financial Statements
                
                
                68


61
 
 **Report
          of Independent Registered Public Accounting
          Firm**
 
 To
          the
          Partners of
 United
            States Oil Fund, LP (formerly New York Oil ETF, LP)
  We
            have
            audited the accompanying statements of financial condition of United
            States Oil
            Fund, LP, (formerly New York Oil ETF, LP) (the “Fund”) as of December 31, 2006
            and 2005, including the schedule of investments as of December 31, 2006,
            and the
            related statements of operations, changes in partners’ capital and cash flows
            for the year ended December 31, 2006 and the period from inception (May
            12,
            2005) through December 31, 2005. These financial statements are the
            responsibility of the Fund’s management. Our responsibility is to express an
            opinion on these financial statements based on our audits.
 
 We
            conducted our audits in accordance with standards of the Public Company
            Accounting Oversight Board (United States). Those standards require that
            we plan
            and perform the audits to obtain reasonable assurance about whether the
            financial statements are free of material misstatement. An audit includes
            examining, on a test basis, evidence supporting the amounts and disclosures
            in
            the financial statements. An audit also includes assessing the accounting
            principles used and significant estimates made by management, as well
            as
            evaluating the overall financial statement presentation. We believe that
            our
            audits provide a reasonable basis for our opinion.
 
 In
            our
            opinion, the financial statements referred to above present fairly, in
            all
            material respects, the financial position of United States Oil Fund,
            LP
            (formerly New York Oil ETF, LP) as of December 31, 2006 and 2005, and the
            results of its operations and its cash flows for the year ended December
            31,
            2006 and the period from inception (May 12, 2005) through December 31,
            2005 in
            conformity with accounting principles generally accepted in the United
            States of
            America.
  /s/
            SPICER JEFFRIES LLP
  Greenwood
            Village, Colorado
 March
            15,
            2007
 62
 ***United
                      States Oil Fund, LP******Statements
                      of Financial Condition******December
                      31, 2006 and 2005*****2006**
                  
                  **2005****Assets**Cash
                      and cash equivalents
                  
                  $
                  712,883,812
                  
                  $
                  1,000Equity
                      in UBS Securities LLC trading accounts:Cash
                  
                  
                  87,123,636
                  
                  
                  -Unrealized
                      loss on open commodity futures contracts
                  
                  
                  (34,383,000
                  )
                  
                  -Receivable
                      for units sold
                  
                  
                  36,080,896
                  
                  
                  -Interest
                      receivable
                  
                  
                  2,626,230
                  
                  
                  -Other
                      assets
                  
                  
                  17,000
                  
                  
                  -*Total
                      assets*
                  
                  $
                  804,348,574
                  
                  $
                  1,000**Liabilities
                      and Partners' Capital**General
                      Partner management fees (Note 3)
                  
                  $
                  332,736
                  
                  $
                  -Commissions
                      payable
                  
                  
                  44,386
                  
                  
                  -Other
                      liabilities
                  
                  
                  22,198
                  
                  
                  -*Total
                      liabilities*
                  
                  
                  399,320
                  
                  
                  -**Commitments
                      and Contingencies**(Notes 3,
                      4 and 5)**Partners'
                      Capital**General
                      Partner
                  
                  
                  -
                  
                  
                  20Limited
                      Partners
                  
                  
                  803,949,254
                  
                  
                  980*Total
                      Partners' Capital*
                  
                  
                  803,949,254
                  
                  
                  1,000*Total
                      liabilities and partners' capital*
                  
                  $
                  804,348,574
                  
                  $
                  1,000Limited
                      Partners' units outstanding, December 31, 2006
                  
                  
                  15,500,000
                  
                  
                  -Net
                      asset value per unit (commencement of operations, April 10,
                      2006)
                  
                  $
                  67.39
                  
                  $
                  -Net
                      asset value per unit, December 31, 2006
                  
                  $
                  51.87
                  
                  $
                  -Market
                      value per unit, December 31, 2006
                  
                  $
                  51.60
                  
                  $
                  -*See
                      accompanying notes to financial statements.*
 63
 ***United
                            States Oil Fund, LP******Schedule
                            of Investments******December
                            31, 2006*****Open
                            Futures Contracts****Loss
                            on Open****Number
                            of**
                        
                        **Commodity**
                        
                        **%
                            of Partners'****Contracts**
                        
                        **Contracts**
                        
                        **Capital****United
                            States Contracts**Crude
                            Oil Future contracts, expires February 2007
                        
                        
                        13,171
                        
                        $
                        (34,383,000
                        )
                        
                        (4.28
                        )
  **Cash
                            Equivalents****Cost**
                        
                        **Market
                            Value****United
                            States - Money Market Funds**AIM
                            STIT- Liquid Assets Portfolio
                        
                        $
                        171,344,554
                        
                        $
                        171,344,554
                        
                        
                        21.31AIM
                            STIT- STIC Prime Portfolio
                        
                        
                        171,230,961
                        
                        
                        171,230,961
                        
                        
                        21.30Goldman
                            Sachs Financial Square Funds - Prime Obligations Fund
                        
                        
                        190,268,507
                        
                        
                        190,268,507
                        
                        
                        23.67$
                        532,844,022
                        
                        
                        532,844,022
                        
                        
                        66.28
  **Cash**
                        
                        
                        180,039,790
                        
                        
                        22.39**Total
                          cash and cash
                          equivalents**
                        
                        
                        712,883,812
                        
                        
                        88.67**Cash
                            on deposit with broker**
                        
                        
                        87,123,636
                        
                        
                        10.84**Other
                            assets in excess of liabilities**
                        
                        
                        38,324,806
                        
                        
                        4.77**Total
                            Partners' Capital**
                        
                        $
                        803,949,254
                        
                        
                        100.00*See
                            accompanying notes to financial statements.*
 64
 ***United
                            States Oil Fund, LP******Statements
                            of Operations******For
                            the period from (April 10, 2006) commencement of operations
                            to December
                            31, 2006******and
                            the period from (May 12, 2005) inception to December
                            31,
                            2005*****2006**
                        
                        **2005****Income**Gains
                            (losses) on trading of commodity futures contracts:Realized
                            losses on closed positions
                        
                        $
                        (104,063,960
                        )
                        $
                        -Change
                            in unrealized losses on open positions
                        
                        
                        (34,383,000
                        )
                        
                        -Interest
                            income
                        
                        
                        13,930,431
                        
                        
                        -Other
                            income
                        
                        
                        129,000
                        
                        
                        -*Total
                            loss*
                        
                        
                        (124,387,529
                        )
                        
                        -**Expenses**General
                            Partner management fees (Note 3)
                        
                        
                        1,460,448
                        
                        
                        -Brokerage
                            commissions
                        
                        
                        478,713
                        
                        
                        -Other
                            expenses
                        
                        
                        22,198
                        
                        
                        -*Total
                            expenses*
                        
                        
                        1,961,359
                        
                        
                        -**Net
                            loss**
                        
                        $
                        (126,348,888
                        )
                        $
                        -**Net
                            loss per limited partnership unit**
                        
                        $
                        (15.52
                        )
                        $
                        -**Net
                            loss per weighted average limited partnership
                            unit**
                        
                        $
                        (18.00
                        )
                        $
                        -**Weighted
                            average limited partnership units outstanding**
                        
                        
                        7,018,797
                        
                        
                        -*See
                            accompanying notes to financial statements.*
 65
 ***United
                          States Oil Fund, LP******Statements
                          of Changes in Partners' Capital******For
                          the period from (April 10, 2006) commencement of operations
                          to December
                          31, 2006******and
                          the period from (May 12, 2005) inception to December 31,
                          2005*****General
                          Partner**
                      
                      **Limited
                          Partners**
                      
                      **Total****Balances,
                          at Inception**
                      
                      $
                      -
                      
                      $
                      -
                      
                      $
                      -Initial
                          contribution of capital
                      
                      
                      20
                      
                      
                      980
                      
                      
                      1,000**Balances,
                          at December 31, 2005**
                      
                      
                      20
                      
                      
                      980
                      
                      
                      1,000Addition
                          of 29,000,000 partnership units
                      
                      
                      -
                      
                      
                      1,740,249,722
                      
                      
                      1,740,249,722Redemption
                          of 13,500,000 partnership units
                      
                      
                      (20
                      )
                      
                      (809,952,560
                      )
                      
                      (809,952,580
                      )Net
                          loss
                      
                      
                      -
                      
                      
                      (126,348,888
                      )
                      
                      (126,348,888
                      )**Balances,
                          at December 31, 2006**
                      
                      $
                      -
                      
                      $
                      803,949,254
                      
                      $
                      803,949,254**Net
                          Asset Value Per Unit**At
                          December 31, 2005
                      
                      $
                      -At
                          April 10, 2006 (commencement of operations)
                      
                      $
                      67.39At
                          December 31, 2006
                      
                      $
                      51.87*See
                          accompanying notes to financial statements.*
  66
  ***United
                          States Oil Fund, LP******Statements
                          of Cash Flows******Period
                          from (April 10, 2006) commencement of operations to December
                          31,
                          2006******and
                          the period from (May 12, 2005) inception to December 31,
                          2005*****2006**
                      
                      **2005****Cash
                          Flows from Operating Activities:**Net
                          loss
                      
                      $
                      (126,348,888
                      )
                      $
                      -Adjustments
                          to reconcile net loss to net cashused
                          in operating activities:Increase
                          in commodity futures trading account - cash
                      
                      
                      (87,123,636
                      )
                      
                      -Increase
                          in unrealized loss on futures contracts
                      
                      
                      34,383,000
                      
                      
                      -Increase
                          in interest receivable and other assets
                      
                      
                      (2,643,230
                      )
                      
                      -Increase
                          in management fees payable
                      
                      
                      332,736
                      
                      
                      -Increase
                          in commissions payable
                      
                      
                      44,386
                      
                      
                      -Increase
                          in other liabilities
                      
                      
                      22,198
                      
                      
                      -*Net
                          cash used in operating activities*
                      
                      
                      (181,333,434
                      )
                      
                      -**Cash
                          Flows from Financing Activities:**Subscription
                          of partnership units
                      
                      
                      1,704,168,826
                      
                      
                      1,000Redemption
                          of partnership units
                      
                      
                      (809,952,580
                      )
                      
                      -*Net
                          cash provided by financing activities*
                      
                      
                      894,216,246
                      
                      
                      1,000**Net
                          Increase in Cash and Cash Equivalents**
                      
                      
                      712,882,812
                      
                      
                      1,000**Cash
                          and Cash Equivalents**,
                          beginning of period
                      
                      
                      1,000
                      
                      
                      -**Cash
                          and Cash Equivalents**,
                          end of period
                      
                      $
                      712,883,812
                      
                      $
                      1,000*See
                          accompanying notes to financial statements.*
 67
 **United
            States Oil Fund, LP**
 **(formerly
          New York Oil ETF, LP)**
 **Notes
          to Financial Statements**
 **December
          31, 2006**
  **NOTE
          1 - ORGANIZATION AND BUSINESS**
 
 United
          States Oil Fund, LP (formerly New York Oil ETF, LP) (the “Fund”), was organized
          as a limited partnership under the laws of the state of Delaware on May
          12, 2005
          and changed its name on September 30, 2005. The Fund is a commodity pool
          that
          issues units that may be purchased and sold on the American Stock Exchange.
          The
          Fund will continue in perpetuity, unless terminated sooner upon the occurrence
          of one or more events as described in its First Amended and Restated Limited
          Partnership Agreement (the “Limited Partnership Agreement”). The investment
          objective of the Fund is for its net asset value to reflect the performance
          of
          the price of light, sweet crude oil, less the Fund’s expenses. The Fund will
          accomplish its objectives through investments in futures contracts for
          light,
          sweet crude oil, other types of crude oil, heating oil, gasoline, natural
          gas
          and other petroleum-based fuels that are traded on the New York Mercantile
          Exchange and other U.S. and foreign exchanges (“Oil Futures Contracts”) and
          other oil interests such as cash-settled options on Oil Futures Contracts,
          forward contracts for oil, and over-the-counter transactions that are based
          on
          the price of oil. Victoria Bay Asset Management, LLC is the general partner
          of
          the Fund (the “General Partner”) and is also responsible for the management of
          the Fund. The
          Fund
          commenced operations on April 10, 2006 . The
          General Partner is a member of the National Futures Association (“NFA”) and is a
          commodity pool operator effective December 1, 2005. The
          Fund
          has a fiscal year ending on December 31.
  The
          Fund
          issues limited partnership interests (“Units”) to authorized purchasers by
          offering creation baskets consisting of 100,000 Units (“Creation Baskets”)
          through a marketing agent. The purchase price for a Creation Basket is
          based
          upon the net asset value of a Fund Unit. In addition, authorized purchasers
          pay
          the Fund a $1,000 fee for the creation of each Creation Basket. The initial
          offering price of the initial creation basket was based on the closing
          price of
          the near month oil futures contracts as traded and reported on the New
          York
          Mercantile Exchange on the last business day prior to the effective date.
          Additionally, subsequent to the sale of the initial Creation Basket, Units
          can
          be purchased or sold on a nationally recognized securities exchange in
          smaller
          increments. Units purchased or sold on a nationally recognized securities
          exchange are not made at the net asset value of the Fund but rather at
          market
          prices quoted on the stock exchange.
 
 On
          April
          10, 2006, the Fund listed its Units on the American Stock Exchange under
          the
          ticker symbol “USO”. On that day, the Fund established its initial NAV by
          setting the price at $67.39 per Unit and issued 200,000 Units in exchange
          for
          $13,478,000. The Fund also commenced investment operations on that day
          by
          purchasing oil futures contracts traded on the New York Mercantile Exchange
          that
          are based on West Texas Intermediate light, sweet crude oil.
  **NOTE
          2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **Revenue
          Recognition**
 
 Commodity
          futures contracts, forward contracts, physical commodities, and related
          options
          are recorded on the trade date. All such transactions are recorded on the
          identified cost basis and marked to market daily. Unrealized gains or losses
          on
          open contracts are reflected in the statement of financial condition and
          the
          difference between original contract amount and market value (as determined
          by
          exchange settlement prices for futures contracts and related options and
          cash
          dealer prices at a predetermined time for forward contracts, physical
          commodities, and their related options) as of the last business day of
          the year
          or as of the last date of the financial statements. Changes in the unrealized
          gains or losses between periods are reflected in the statement of operations.
          The Fund earns interest on its assets on deposit at the Broker at the 90-day
          Treasury bill rate less fifty basis points for deposits denominated in
          U.S.
          dollars.
 
 **Brokerage
          Commissions**
 
 Brokerage
          commissions on all open commodity futures contracts are accrued on a full-turn
          basis.
 68
 **Income
          Taxes**
 
 The
          Fund
          is not subject to federal income taxes; each partner reports his/her allocable
          share of income, gain, loss deductions or credits on his/her own income
          tax
          return.
 
 **Redemptions**
 
 Authorized
          persons may redeem Units from the Fund only in blocks of 100,000 Units
          called
“Redemption Baskets”. The amount of the redemption proceeds for a Redemption
          Basket will be equal to the net asset value of the Fund Units in the Redemption
          Basket.
 
 **Partnership
          Capital and Allocation of Partnership Income and Losses**
 
 Profit
          or
          loss shall be allocated among the partners of the Fund in proportion to
          the
          number of Units each partner holds as of the close of each month. The General
          Partner may revise, alter or otherwise modify this method of allocation
          as
          described in the Limited Partnership Agreement.
 
 **Calculation
          of Net Asset Value**
 
 The
          Fund
          calculates net asset value on each trading day by taking the current market
          value of its total assets, subtracting any liabilities and dividing the
          amount
          by the total number of Units issued and outstanding. The Fund uses the
          New York
          Mercantile Exchange closing price on that day for contracts held on the
          New York
          Mercantile Exchange.
 
 **Loss
          per Limited Partnership Unit**
 
 Net
          loss
          per limited partnership Unit is the difference between the net asset value
          per
          Unit at the beginning and end of each period. The weighted average number
          of
          limited partnership Units outstanding was computed for purposes of disclosing
          net loss per weighted average limited partnership Unit. The weighted average
          limited partnership Units are equal to the number of Units outstanding
          at period
          end, adjusted proportionately for Units redeemed based on their respective
          time
          outstanding during such period. There were no Units held by the General
          Partner at December 31, 2006.
 
 **Cash
          Equivalents**
 
 As
          of
          December 31, 2006, cash and cash equivalents included money market portfolios
          and overnight time deposits with original maturity dates of three months
          or
          less.
 
 **Use
          of Estimates**
 
 The
          preparation of financial statements in conformity with accounting principles
          generally accepted in the United States of America requires the Fund’s
          management to make estimates and assumptions that affect the reported amount
          of
          assets and liabilities and disclosure of contingent assets and liabilities
          at
          the date of the financial statement, and the reported amounts of the revenue
          and
          expenses during the reporting period. Actual results could differ from
          those
          estimates.
  **NOTE 3
            - GENERAL PARTNER MANAGEMENT FEE AND RELATED PARTY
            TRANSACTIONS**
 
 Under
            the
            Limited Partnership Agreement, the General Partner is responsible for
            investing
            the assets of the Fund in accordance with the objectives and policies
            of the
            Fund. In addition, the General Partner has arranged for one or more third
            parties to provide administrative, custody, accounting, transfer agency
            and
            other necessary services to the Fund. For these services, the Fund is
            contractually obligated to pay the General Partner a fee, which is paid
            monthly,
            based on average daily net assets that are equal to .50% per annum on
            average
            net assets of $1,000,000,000 or less and .20% per annum of average daily
            net
            assets that are greater than $1,000,000,000. The Fund will pay for all
            brokerage
            fees, taxes and
            other
            expenses, including licensing fees for the use of intellectual property,
            registration or other fees paid to the Securities and Exchange Commission,
            the
            National Association of Securities Dealers, or any other regulatory agency
            in
            connection with the offer and sale of subsequent Units after its initial
            registration and all legal, accounting, printing and other expenses
            associated therewith. The Fund also pays the fees and expenses, including
            the
            directors and officers’ liability insurance, of the independent
            directors.
  For
            the period ended December 31, 2006, all of the
            Fund's offering and organizational expenses have been funded by an affiliate
            of
            the General Partner.  The Fund does not have any obligation or intention to
            reimburse such payments.  The Fund incurred offering and organizational
            costs in the amount of $1,571,318.
 69
 **NOTE
          4 - CONTRACTS AND AGREEMENTS**
 
 The
          Fund
          is party to a marketing agent agreement dated March 13, 2006 with ALPS
          Distributors Inc. (“ALPS”), a Colorado corporation, whereby ALPS provides
          certain marketing services for the Fund as outlined in the agreement. The
          fees
          of the marketing agent, which are borne by the General Partner, include
          a
          marketing fee of $425,000 per annum plus the following incentive fee: zero
          basis
          points on Fund assets from $0 - $500 million; 4 basis points on Fund assets
          from
          $500 million - $4 billion; and 3 basis points on Fund assets in excess
          of $4
          billion.
 
 The
          above
          fees do not include the following expenses, which are also borne by the
          General
          Partner: the cost of placing advertisements in various periodicals; web
          construction and development; or the printing and production of various
          marketing materials.
 
 The
          Fund
          is also party to a custodian agreement dated March 13, 2006, with Brown
          Brothers
          Harriman & Co. (“Brown Brothers”), whereby Brown Brothers holds investments
          on behalf of the Fund. The General Partner of the Fund pays the fees of
          the
          custodian, which shall be agreed to from time to time between the parties.
          In
          addition, the Fund is party to an administrative agency agreement dated
          March
          13, 2006, also with Brown Brothers, whereby Brown Brothers acts as the
          administrative agent, transfer agent and registrar for the Fund. The General
          Partner also pays the fees of Brown Brothers for its services under this
          agreement and such fees will be determined by the parties from time to
          time.
 
 Currently,
          the General Partner pays Brown Brothers for its services in the foregoing
          capacity a minimum amount of $300,000 annually and, once the Fund’s net assets
          are above $500 million, an asset charge, which is not reflected in either
          agreement, ranging between 0.035% and 0.06%, plus a $50,000 transfer agency
          fee,
          and transaction charges of $7.00 to $15.00 per transaction.
 
 The
          Fund
          invests primarily in oil futures contracts traded on the New York Mercantile
          Exchange (the “Exchange”). The Fund and the Exchange are discussing entering
          into and in the process of finalizing a License Agreement whereby the Fund
          will
          be granted a non-exclusive license to use certain of the Exchange’s settlement
          prices and service marks. Under the proposed License Agreement, the Exchange
          would receive an asset-based fee for the license, which will be paid by
          the
          Fund.
 
 The
          Fund
          expressly disclaims any association with the Exchange or endorsement of
          the Fund
          by the Exchange and acknowledges that “NYMEX” and “New York Mercantile Exchange”
are registered trademarks of such Exchange.
 
 The
          Fund
          has entered into a brokerage agreement with UBS Securities LLC, formerly
          ABN
          AMRO Incorporated, Futures Commission Merchant (the “Broker”). The agreement
          provides that the Broker charge the Fund commissions of approximately $7
          per
          round-turn trade plus applicable exchange and NFA fees for futures contracts
          and
          options on futures contracts.
 
 **NOTE
          5 - FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISKS AND
          CONTINGENCIES**
 
 The
          Fund
          engages in the speculative trading of U.S. futures contracts and options
          on U.S.
          futures contracts (collectively “derivatives”). The Fund is exposed to both
          market risk, which is the risk arising from changes in the market value
          of the
          contracts; and credit risk, which is the risk of failure by another party
          to
          perform according to the terms of a contract.
 
 All
          of
          the contracts currently traded by the Fund are exchange traded. The risks
          associated with exchange-traded contracts are generally perceived to be
          less
          than those associated with over-the-counter transactions since, in
          over-the-counter transactions, the Fund must rely solely on the credit
          of their
          respective individual counterparties. However, in the future, if the Fund
          were
          to enter into non-exchange traded contracts, it would be subject to the
          credit
          risk associated with counterparty non-performance. The credit risk from
          counterparty non-performance associated with such instruments is the net
          unrealized gain, if any. The Company also has credit risk since the sole
          counterparty to all domestic futures contracts is the exchange clearing
          corporation. In addition, the Fund bears the risk of financial failure
          by the
          clearing broker.
 70
 The
          purchase and sale of futures and options on futures contracts requires
          margin
          deposits with a Futures Commission Merchant (“FCM”). Additional deposits may be
          necessary for any loss on contract value. The Commodity Exchange Act requires
          an
          FCM to segregate all customer transactions and assets from the FCM’s proprietary
          activities.
 
 The
          Fund’s cash and other property such as U.S. Treasury Bills, deposited with an
          FCM are considered commingled with all other customer funds subject to
          the FCM’s
          segregation requirements. In the event of an FCM’s insolvency, recovery may be
          limited to a pro rata share of segregated funds available. It is possible
          that
          the recovered amount could be less than the total of cash and other property
          deposited.
 
 For
          derivatives, risks arise from changes in the market value of the contracts.
          Theoretically, the Fund is exposed to a market risk equal to the value
          of
          futures contracts purchased and unlimited liability on such contracts sold
          short. As both a buyer and a seller of options, the Fund pays or receives
          a
          premium at the outset and then bears the risk of unfavorable changes in
          the
          price of the contract underlying the option.
 
 The
          Fund’s policy is to continuously monitor its exposure to market and counterparty
          risk through the use of a variety of financial, position and credit exposure
          reporting controls and procedures. In addition, the Fund has a policy of
          reviewing the credit standing of each broker of counterparty with which
          it
          conducts business.
 
 The
          financial instruments held by the Fund are reported in the statement of
          financial condition at market or fair value, or at carrying amounts that
          approximate fair value, because of their highly liquid nature and short-term
          maturity.
 
 The
          Fund
          received a letter from Goldman, Sachs & Co. (“Goldman Sachs”) on March 17,
          2006, providing the Fund notice under 35 U.S.C. Section 154(d) of two pending
          United States patent applications, Publication Nos. 2004/0225593A1 and
          2006/0036533A1. The Fund is currently reviewing the Goldman Sachs published
          patent applications, and has engaged in discussions with Goldman Sachs
          regarding
          their pending applications and the Fund’s own pending patent application. At
          this time, due in part to the fact that the Goldman Sachs patent applications
          are pending and have not been issued as U.S. Patents, the Fund is unable
          to
          determine what the outcome of this matter will be.
 
 **NOTE 6
          - FINANCIAL HIGHLIGHTS**
 
 The
          following table presents per Unit performance data and other supplemental
          financial data for the period April 10, 2006 (commencement of operations)
          to
          December 31, 2006 for the limited partners. This information has been derived
          from information presented in the financial statements.
  April
                      10, 2006(commencement
                      ofoperations)
                      toDecember
                      31, 2006**Per
                      Unit Operating Performance:**Net
                      asset value, beginning of period
                  
                  $
                  67.39Total loss
                  
                  
                  (15.24
                  )Total
                      expenses
                  
                  
                  (0.28
                  )Net
                      decrease in net asset value
                  
                  
                  (15.52
                  )Net
                      asset value, end of period
                  
                  $
                  51.87**Total
                      Return**
                  
                  
                  (23.03
                  )%**Ratios
                      to Average Net Assets (annualized)**Total loss
                  
                  
                  (42.59
                  )%Expenses
                      excluding management fees
                  
                  
                  (0.17
                  )%Management
                      fees
                  
                  
                  (0.50
                  )%Net loss
                  
                  
                  (43.26
                  )%
  Total
          returns are calculated based on the change in value during the period.
          An
          individual limited partner’s total return and ratio may vary from the above
          total returns and ratios based on the timing of contributions and
          withdrawals.
 71


**Item 9.**
            **Changes
                in and Disagreements With Accountants on Accounting and Financial
                Disclosure.**




Not
      applicable.




**Item 9A.**
            **Controls
                and Procedures.**




**Disclosure
        Controls and Procedures.**
  The
        Fund
        maintains disclosure controls and procedures that are designed to ensure
        that
        material information required to be disclosed in the Fund’s periodic reports
        filed or submitted under the Securities Exchange Act of 1934, as amended
        (the
“Exchange Act”), is recorded, processed, summarized and reported within the time
        period specified in the SEC’s rules and forms.
  The
        duly
        appointed officers of Victoria Bay Asset Management, LLC, USOF's General
        Partner, including its chief executive officer and the chief financial
        officer, who perform functions equivalent to those a principal executive
        officer and principal financial officer of USOF would perform if USOF had
        any
        officers, have evaluated the effectiveness of USOF’s disclosure and control
        procedures and have concluded that the disclosure controls and procedures
        of
        USOF have been effective as of the end of the period covered by this
        report.
 
 **Management’s
        Annual Report on Internal Control Over Financial
        Reporting.**
  Since
        USOF is not an accelerated filer or large accelerated filer, as such terms
        are
        defined in Rule 405 of the Securities Act of 1933, management of the General
        Partner is not required to, and has not, evaluated the effectiveness of USOF’s
        internal control over financial reporting as of December 31, 2006. Beginning
        with USOF’s annual report on Form 10-K filed for the year ending December 31,
        2007, management of the General Partner will be required to make such an
        assessment.
  **Attestation
        Report of Registered Public Accounting Firm.**
  Not
        applicable.
  **Change
        in Internal Control Over Financial Reporting.**
  There
        were no changes in USOF’s internal control over financial reporting during
        USOF’s last fiscal quarter that have materially affected, or are reasonably
        likely to materially affect USOF’s internal control over financial
        reporting.


**Item 9B.**
            **Other
                Information.**




None.


72


**Part
      III**





**Item 10.**
            **Directors,
                Executive Officers and Corporate
                Governance.**




Messrs.
      Gerber and Mah also serve as executive officers of the General Partner. USOF
      has
      no executive officers. Its affairs are generally managed by the General Partner.
      The following individuals serve as Management Directors of the General
      Partner.


***Nicholas
        Gerber*** has been
        the President and CEO of the General Partner since June 9, 2005 and a Management
        Director of the General Partner since May 10, 2005. He maintains his main
        business office at 1320 Harbor Bay Parkway, Suite 145, Alameda, California
        94502. Mr. Gerber will act as a portfolio manager for USOF. He registered
        with the NFA as a Principal of the General Partner in November 2005, and
        as an
        Associated Person of the General Partner in December 2005. Currently, Mr.
        Gerber
        manages USNG. Mr. Gerber has an extensive background in securities
        portfolio management and in developing investment funds that make use of
        indexing and futures contracts. He is also the founder of Ameristock
        Corporation, a California-based investment adviser registered under the
        Investment Advisers Act of 1940, that has been sponsoring and providing
        portfolio management services to mutual funds since 1995. Since 1995,
        Mr. Gerber has been the portfolio manager of the Ameristock Mutual Fund,
        Inc. a mutual fund registered under the Investment Company Act of 1940, focused
        on large cap U.S. equities that currently has approximately $800 million
        in
        assets. In these roles, Mr. Gerber has gained extensive experience in
        evaluating and retaining third-party service providers, including custodians,
        accountants, transfer agents, and distributors. Prior to managing Ameristock
        Mutual Fund Inc., Mr. Gerber served as a portfolio manager with Bank of
        America Capital Management. While there he was responsible for the daily
        stewardship of four funds with a combined value in excess of $240 million.
        At
        Bank of America Capital Management, Mr. Gerber worked extensively in the
        development and managing of mutual funds and institutional accounts that
        were
        designed to track assorted equity market indices such as the Standard &
Poor’s 500 and the Standard & Poor’s Midcap 400. Before joining Bank of
        America, he was managing director and founder of the Marc Stevens Futures
        Index
        Fund, a fund that combined the use of commodity futures with equity stock
        index
        futures. The futures index fund was a commodity pool and Mr. Gerber was the
        CPO. It was ultimately purchased by Newport Commodities. Mr. Gerber’s two
        decades of experience in institutional investment include a period of employment
        as a floor trader on the New York Futures Exchange. Mr. Gerber has passed
        the Series 3 examination for associated persons. He holds an MBA in finance
        from
        the University of San Francisco and a BA from Skidmore College. Mr. Gerber
        is 44 years old.
  ***Howard
          Mah*** has been
          a Management Director of the General Partner since May 10, 2005, Secretary
          of
          the General Partner since June 9, 2005, and Chief Financial Officer of
          the
          General Partner since May 23, 2006. In these roles, Mr. Mah is involved
          in the
          management of both USOF and USNG. Mr. Mah also serves as the General
          Partner’s Chief Compliance Officer. He received a Bachelor of Education from the
          University of Alberta, in 1986 and an MBA from the University of San Francisco
          in 1988. He has been the Compliance Officer of Ameristock Corporation since
          2001; a tax & finance consultant in private practice since 1995, Secretary
          of Ameristock Mutual Fund since 1995 and Ameristock Focused Value Fund
          from
          December 2000 to January 2005; Chief Compliance Officer of Ameristock Mutual
          Fund since 2004 and the Co-Portfolio Manager of the Ameristock Focused
          Value
          Fund from December 2000 to January 2005. Mr. Mah is 42 years
          old.
  ***Andrew
        F. Ngim*** has been
        a Management Director of the General Partner since May 10, 2005 and Treasurer
        of
        the General Partner since June 9, 2005. As Treasurer of the General Partner,
        Mr.
        Ngim is involved in the management of both USOF and USNG. He received a Bachelor
        of Arts from the University of California at Berkeley in 1983. Mr. Ngim has
        been the Managing Director of Ameristock Corporation since 1999. He was the
        co-portfolio manager of the Ameristock Large Company Growth Fund from December
        2000 to June 2002 and a Benefits Consultant with PriceWaterhouseCoopers from
        1994 to 1999. Mr. Ngim is 46 years old.
  ***Robert
        L. Nguyen*** has been
        a Management Director of the General Partner since May 10, 2005. As a Management
        Director of the General Partner, Mr. Nguyen is involved on the management
        of
        both USOF and USNG. He received a Bachelor of Science from California State
        University Sacramento in 1981. Mr. Nguyen has been the Managing Principal
        of Ameristock Corporation since 2000. He was Co-Portfolio Manager of the
        Ameristock Large Company Growth Fund from December 2000 to June 2002 and
        Institutional Specialist with Charles Schwab & Company Inc. from 1995 to
        1999. Mr. Nguyen is 47 years old.
 73
 
 The
          following individuals provide significant services to USOF but are employed
          by
          the entities noted below.
  ***John
        Love*** acts as
        the Operations Manager and is employed by Ameristock. Mr. Love has served
        as the operations manager of Ameristock Corporation since 2002, where he
        is
        responsible for marketing the Ameristock Mutual Fund. From April 2001 to
        September 2002, Mr. Love was the project manager for TouchVision
        Interactive where he provided leadership to project teams while assisting
        with
        business and process development. From January 1996 to November 2000,
        Mr. Love was the managing director of Jamison/Gold (Keane Inc.) where he
        provided leadership to all departments including operations, production,
        technology, sales, marketing, administration, recruiting, and finance. From
        December 2000 to February 2001, Mr. Love was employed by Digital Boardwalk
        Inc. Mr. Love’s experience also includes leading a group of multimedia
        producers who controlled web and kiosk projects from pre-contract to deployment.
        He holds a BFA in cinema-television from the University of Southern California.
        Mr. Love does not have any experience operating a commodity pool.
        Mr. Love is 35 years old.
  ***John
        T. Hyland, CFA*** acts as
        a Portfolio Manager and as the Director of Portfolio Research and is employed
        by
        the General Partner. He registered with the NFA as an Associated Person of
        the
        General Partner in December 2005, and as a Principal of the General Partner
        in
        January 2006. In April 2006, Mr. Hyland became the Portfolio Manager and
        Director of Portfolio Research for USOF. As part of his responsibilities
        for
        USOF, Mr. Hyland handles day-to-day trading, helps set investment policies,
        and
        oversees USOF’s activities with its futures commission brokers,
        custodian-administrator, and marketing agent. Mr. Hyland has an extensive
        background in portfolio management and research with both equity and fixed
        income securities, as well as in the development of new types of complex
        investment funds. In July 2001, Mr. Hyland founded Towerhouse Capital
        Management, LLC, a firm that provides portfolio management and new fund
        development expertise to non-U.S. institutional investors. Mr. Hyland has
        been, and remains, a Principal and Portfolio Manager for Towerhouse.  From
        July 2001 to January 2002, Mr. Hyland was the Director of Global Property
        Securities Research for Roulac International, where he worked on the development
        of a hedge fund focused on global real estate stocks. From 1996 through 2001,
        Mr. Hyland was the Director of Securities Research and Portfolio Manager
        for the capital markets division of CB Richard Ellis, a global commercial
        real
        estate services firm. His division provided portfolio management of equities
        as
        an advisor or sub-advisor for mutual funds and separate accounts focused
        on real
        estate investment trusts. In addition, his group conducted research in the
        area
        of structured commercial real estate debt (including Commercial Mortgage-Back
        Securities, or “CMBS”), and lead the creation of one of the earliest
        re-securitizations of multiple CMBS pool tranches into a Collateralized Debt
        Obligation (“CDO”) vehicle. In the ten years prior to working at CB Richard
        Ellis, Mr. Hyland had worked as a portfolio manager or financial
        representative for several other investment firms and mutual funds.
        Mr. Hyland received his Chartered Financial Analyst (“CFA”) designation in
        1994. From 1993 until 2003, Mr. Hyland was on the Board of Directors of the
        Security Analysts of San Francisco (“SASF”), a not-for-profit organization of
        investment management professionals. He served as the president of the SASF
        from
        2001-2002. Mr. Hyland is a member of the CFA Institute (formerly AIMR). He
        is also a member of the National Association of Petroleum Investment Analysts
        (NAPIA), a not-for-profit organization of investment professionals focused
        on
        the oil industry. He serves as an arbitrator for the National Association
        of
        Securities Dealers (“NASD”), as part of their dispute resolution program. He is
        a graduate of the University of California, Berkeley and received a BA in
        political science/international relations in 1982. Mr. Hyland is 47 years
        old.
  ***Kathryn
        D. Rooney*** acts as
        a Marketing Manager and is employed by Ameristock and ALPS. Her primary
        responsibilities include soliciting orders, customers and customer funds.
        Currently, Ms. Rooney is the Director of Business Development for
        Ameristock Mutual Fund. She has held this position since September of 2003.
        Prior to working for Ameristock Mutual Fund, Ms. Rooney was the Regional
        Director for Accessor Capital Management from November of 2002 to September
        of
        2003. Before working at Accessor Capital Management, Ms. Rooney worked at
        ALPS Mutual Fund Services, Inc. as a National Sales Director. She held this
        position from May of 1999 through November of 2002. Before working at ALPS
        Mutual Fund Services, Inc., Ms. Rooney worked as a Trust Officer for Fifth
        Third Bank from June of 1994 through May of 1999. Ms. Rooney is 34 years
        old.
 74
 The
        following individuals serve as independent directors of the General
        Partner:
  ***Peter
        M. Robinson*** has been
        an Independent Director of the General Partner since September 30, 2005.
        Mr. Robinson has been employed with the Hoover Institution since 1993.
        Mr. Robinson graduated from Dartmouth College in 1979 and Oxford University
        in 1982. Mr. Robinson spent six years in the White House, serving from 1982
        to 1983 as chief speechwriter to Vice President George Bush and from 1983
        to
        1988 as special assistant and speechwriter to President Ronald Reagan. After
        the
        White House, Mr. Robinson received an MBA from the Stanford University
        Graduate School of Business. Mr. Robinson then spent a year in New York
        City with Fox Television. He spent a second year in Washington, D.C., with
        the
        Securities and Exchange Commission, where he served as the director of the
        Office of Public Affairs, Policy Evaluation, and Research. Mr. Robinson has
        also written three books and has been published in the *New
        York Times, Red Herring* , and *Forbes
        ASAP* and he
        is the editor of *Can
        Congress Be Fixed?: Five Essays on Congressional Reform* (Hoover
        Institution Press, 1995). Mr. Robinson is 48 years old.
  ***Gordon
        L. Ellis*** has been
        an Independent Director of the General Partner since September 30, 2005.
        Mr. Ellis has been Chairman of International Absorbents, Inc. since July
        1988, President and Chief Executive Officer since November 1996 and a Class
        I
        Director of the company since July 1985. Mr. Ellis is also a director of
        Absorption Corp., International Absorbents, Inc.’s wholly-owned subsidiary.
        Mr. Ellis is a director/trustee of Polymer Solutions, Inc., a former
        publicly-held company that sold all of its assets effective as of February
        3,
        2004 and is currently winding
        down its operations and liquidating following such sale. Mr. Ellis is a
        professional engineer with an MBA in international finance. Mr. Ellis is 59
        years old.
  ***Malcolm
        R. Fobes III*** has been
        an Independent Director of the General Partner since September 30, 2005.
         Mr. Fobes is the founder, Chairman and Chief Executive Officer of
        Berkshire Capital Holdings, Inc., a California-based investment adviser
        registered under the Investment Advisers Act of 1940, that has been sponsoring
        and providing portfolio management services to mutual funds since 1997. Since
        1997, Mr. Fobes has been the Chairman and President of The Berkshire Funds,
        a
        mutual fund investment company registered under the Investment Company Act
        of
        1940. Mr. Fobes also serves as portfolio manager of the Berkshire Focus Fund,
        a
        mutual fund registered under the Investment Company Act of 1940, which
        concentrates its investments in the electronic technology industry. From
        April
        2000 to July 2006, Mr. Fobes also served as co-portfolio manager of The Wireless
        Fund, a mutual fund registered under the Investment Company Act of 1940,
        which
        concentrates its investments in companies engaged in the development,
        production, or distribution of wireless-related products or services. In
        these
        roles, Mr. Fobes has gained extensive experience in evaluating and retaining
        third-party service providers, including custodians, accountants, transfer
        agents, and distributors. Mr. Fobes was also contributing editor of *Start* a *Successful
        Mutual Fund: The Step-by-Step Reference Guide to Make It Happen* (JV
        Books, 1995). Prior to forming Berkshire Capital Holdings, Inc., Mr. Fobes
        was
        employed by various technology-related companies, including Adobe Systems,
        Inc.,
        a leading provider of digital publishing and imaging software technologies.
        Mr.
        Fobes holds a B.S. degree in Finance and Economics from San Jose State
        University in California. Mr. Fobes is 42 years old.
  The
        following are individual Principals, as that term is defined in CFTC Rule
        3.1,
        for USOF: Melinda Gerber, Howard Mah, Andrew Ngim, Robert Nguyen, Peter
        Robinson, Gordon Ellis, Malcolm Fobes, John Love, and John Hyland. These
        individuals are principals due to their positions, however, Nicholas Gerber
        and
        Melinda Gerber are also principals due to their controlling stake in Wainwright.
        Neither the General Partner, nor the principals own or have any other beneficial
        interest in USOF. Nicholas Gerber and John Hyland make trading and investment
        decisions for USOF. Nicholas Gerber, John Love, and John Hyland execute trades
        on behalf of USOF. In addition, Nicholas Gerber, John Love, John Hyland and
        Kathryn Rooney are registered with the CFTC as Associated Persons of the
        General
        Partner and are members of the NFA.
  **Audit
          Committee**
 
 The
          General Partner has an audit committee which is made up of the three independent
          directors (Peter M. Robinson, Gordon L. Ellis, and Malcolm R. Fobes III).
          The
          audit committee is governed by an audit committee charter that is posted
          on
          USOF’s website. Mr. Fobes and Mr. Ellis meet the financial
          sophistication requirements of the American Stock Exchange and the audit
          committee charter and the Board has determined that each is considered
          to be an
“Audit Committee Financial Expert” as defined by the federal securities
          laws.
 
 **Other
          Committees**
 
 Since
          the
          individuals who perform work on behalf of USOF are not compensated by USOF,
          but
          instead by the General Partner, Ameristock or ALPS, USOF does not have
          a
          Compensation Committee. Similarly, since the Directors noted above serve
          on the
          Board of Directors of the General Partner, USOF does not have a Nominating
          Committee.
 75
 
 **Code
            of Ethics**
 
 USOF
            has
            not adopted a Code of Ethics that would apply to its principal executive,
            financial and accounting officers since USOF is managed by the General
            Partner,
            and the individuals who perform the duties of principal executive, principal
            financial and principal accounting officers are employed and compensated
            by the
            General Partner. We may adopt such policies in the future and, to the
            extent we
            do, we will announce such policies by the filing of a Form 8-K that would
            include the text of the Code of Ethics and will include the Code of Ethics
            on
            our website.


**Item 11.**
            **Executive
                Compensation.**




**Compensation
        to the General Partner and Other Compensation.**
  USOF
        does
        not directly compensate any of the executive officers noted above. The
        executive officers noted above are compensated by the General Partner for
        the work they perform on behalf of USOF and other entities controlled by
        the
        General Partner. USOF does not reimburse the General Partner, nor does it
        set
        the amount or form of any portion of the compensation paid to the executive
        officers by the General Partner. USOF pays fees to the General Partner pursuant
        to the LP Agreement under which the fund is obligated to pay the General
        Partner an annualized fee of 0.50% of average daily net assets of the fund
        for
        the first $1,000,000,000 and 0.20% of average daily net assets of the fund
        for
        amounts above $1,000,000,000. For 2006 USOF paid the General Partner aggregate
        fees of $1,460,448.
  **Director
        Compensation**
 
 The
        following table sets forth compensation earned during the year ended
        December 31, 2006, by the Directors of the General Partner.
 **Change
                      in****Pension****Value
                      and****Fees**
                  
                  
                  
                  
                  
                  
                  
                  **Nonqualified**
                  ****
                  ****
                  ****
                  ****
                  ********
                  ****
                  **Earned
                      or**
                  
                  
                  
                  
                  
                  **Non-Equity**
                  
                  **Deferred****Paid
                      in**
                  
                  **Stock**
                  
                  **Option**
                  
                  **Incentive
                      Plan**
                  
                  **Compensation**
                  
                  **All
                      Other****Name**
                  
                  **Cash**
                  
                  **Awards**
                  
                  **Awards**
                  
                  **Compensation**
                  
                  **Plan**
                  
                  **Compensation**
                      (1)
                  
                  **Total****Management
                      Directors**Nicholas
                      Gerber
                  
                  $
                  0
                  
                  
                  NA
                  
                  
                  NA
                  
                  
                  NA
                  
                  $
                  0
                  
                  $
                  0
                  
                  $
                  0Andrew
                      F. Ngim
                  
                  $
                  0
                  
                  
                  NA
                  
                  
                  NA
                  
                  
                  NA
                  
                  $
                  0
                  
                  $
                  0
                  
                  $
                  0Howard
                      Mah
                  
                  $
                  0
                  
                  
                  NA
                  
                  
                  NA
                  
                  
                  NA
                  
                  $
                  0
                  
                  $
                  0
                  
                  $
                  0Robert
                      L. Nguyen
                  
                  $
                  0
                  
                  
                  NA
                  
                  
                  NA
                  
                  
                  NA
                  
                  $
                  0
                  
                  $
                  0
                  
                  $
                  0**Independent
                      Directors**Peter
                      M. Robinson
                  
                  $
                  0
                  
                  
                  NA
                  
                  
                  NA
                  
                  
                  NA
                  
                  $
                  0
                  
                  $
                  17,500
                  
                  $
                  17,500Gordon
                      L. Ellis
                  
                  $
                  0
                  
                  
                  NA
                  
                  
                  NA
                  
                  
                  NA
                  
                  $
                  0
                  
                  $
                  17,500
                  
                  $
                  17,500Malcolm
                      R. Fobes III
                  
                  $
                  0
                  
                  
                  NA
                  
                  
                  NA
                  
                  
                  NA
                  
                  $
                  0
                  
                  $
                  17,500
                  
                  $
                  17,500
 (1)
        Payments made under this column represent cash payments made in lieu of
        directors’ and officers’ insurance coverage. Such payments were made only to the
        Independent Directors of the General Partner.
 76





**Item 12.**
            **Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters.**





None
      of
      the directors or executive officers of the General Partner, nor the employees
      of
      USOF own any units of USOF. In addition, USOF is not aware of any 5% holder
      of its units.




**Item 13.**
            **Certain
                Relationships and Related Transactions, and Director
                Independence.**




USOF
      has and will continue to have certain
      relationships with the General Partner and its affiliates. However, there
      have been no direct financial transactions between the Registrant and the
      directors or officers of the General Partner that have not been disclosed
      herein. See "Item 11. Executive Compensation" and "Item 12. Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder
      Matters." Any transaction with a related person that must be disclosed in
      accordance with SEC Regulation S-K item 404(a), including financial transactions
      by USOF with directors or executive officers of the General Partner or holders
      of beneficial interests in the General Partner or USOF of more than 5%, will
      be
      subject to the provisions regarding "Resolutions of Conflicts of Interest;
      Standard of Care" as set forth in Section 7.7 of the LP Agreement and will
      be
      reviewed and approved by the Audit Committee of the General
      Partner.




**Item 14.**
            **Principal
                Accounting Fees and
                Services.**




During
        the year ended December 31, 2006, the General Partner made the following
        payments to its independent auditors:


2006
              
              
              2005Audit
                  fees
              
              $
              109,000
              
              $
              -Audit-related
                  fees
              
              
              50,000
              
              
              -Tax
                  fees
              
              
              -
              
              
              -All
                  other fees
              
              
              -
              
              
              -$
              159,000
              
              $
              -




Audit
        Fees consist of fees paid to Eisner LLP and Spicer Jeffries LLP for (i) the
        audit of USOF’s annual financial statements included in the Annual Report on
        Form 10-K, review of financial statements included in the Quarterly Reports
        on
        Form 10-Q and filed on its current reports on Form 8-K; and
        (ii) services
        that are normally provided by the Independent Registered Public Accountants
        in
        connection with statutory and regulatory filings or engagements.
  Audit-Related
        Fees consist of fees for assurance and related services that are reasonably
        related to the performance of audit or review of USOF’s financial statements and
        are not reported under Audit Fees.  This category includes fees related to
        audit and attest services not required by statute or regulations, due diligence
        related to mergers, acquisitions and investments and consultations concerning
        financial accounting and reporting standards. The Audit Committee and Board
        of
        Directors of the General Partner approved all of these
        services.


77


**Part
      IV**


**Item 15.**
                **Exhibits,
                    Financial Statement
                    Schedules.**


1.
              See
                  Index to Financial Statements on page 61.2.
              No
                  financial statement schedules are filed herewith because (i) such
                  schedules are not required or (ii) the information required has
                  been
                  presented in the aforementioned financial statements.3.
              Exhibits
                  required to be filed by Item 601 of Regulation
                  S-K.
 
 **Exhibit
        Index**
  Listed
        below are the exhibits which are filed as part of this report (according
        to the
        number assigned to them in Item 601 of Regulation S-K):
 **Exhibit
                      Number**
                  
                  **Description
                      of Document**3.1*****
                  
                  Form
                      of the Third Amended and Restated Agreement of Limited
                      Partnership.3.2**
                  
                  Certificate
                      of Limited Partnership of the Registrant.10.1***
                  
                  Form
                      of Initial Authorized Purchaser Agreement.10.2****
                  
                  Marketing
                      Agent Agreement.10.3***
                  
                  Custodian
                      Agreement.10.4***
                  
                  Administrative
                      Agency Agreement.23.1*
                  
                  Consent
                      of Spicer Jeffries
                      LLP.
  31.1*
                
                Certification
                    of Principal Executive Officer
                    Pursuant to Rule 13a-14(a) under the Securities Exchange Act
                    of
                    1934.31.2*
                
                Certification
                    of Principal Financial Officer
                    Pursuant to Rule 13a-14(a) under the Securities Exchange Act
                    of
                    1934.32.1*
                
                Certification
                    of Principal Executive Officer
                    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18
                    U. S. C.
                    1350).32.2*
                
                Certification
                    of Principal Financial Officer
                    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18
                    U. S. C.
                    1350).
 *         Filed
          Herewith
 **       Incorporated
          by reference to
          Registrant's Registration Statement on Form S-1 (File No. 333- 124950)
          filed on
          May 16, 2005.
 ***    
Incorporated
          by reference
          to Registrant's Pre-Effective Amendment No. 5 to the Registration Statement
          on
          Form S-1 (File No. 333- 124950) filed on March 13, 2006.
 ****   Incorporated
          by reference to
          Registrant's Pre-Effective Amendment No. 7 to the Registration Statement
          on Form
          S-1 (File No. 333- 124950) filed on April 6, 2006.
 ***** Incorporated
          by reference to
          Registrant's Registration Statement on Form S-1 (File No. 333- 140117)
          filed on January 19, 2007.


78
 **SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this Report to be signed on its behalf
      by
      the undersigned thereunto duly authorized on March 26, 2007.




United
                States Oil Fund, LP (Registrant)
              By:
                Victoria Bay Asset Management, LLC, its general partner/S/
                Nicholas D. Gerber**Nicholas
                D. Gerber****Chief
                Executive Officer of****Victoria Bay Asset Management,
                LLC**
              **(Principal
                executive officer****)**DateDate:
                March 26, 2007/S/
              Howard Mah**Howard
                Mah****Chief
                Financial Officer****of Victoria Bay Asset Management,
                LLC**
              **(Principal
                financial and accounting
                officer****)**DateDate:
                March 26, 2007





79




Pursuant
      to the requirements of
      the Securities Exchange Act of 1934, this Report has been signed below by the
      following persons on behalf of the Registrant in the capacities and on the
      dates
      indicated.


**Signature**
              **Title
                  (Capacity)**
              **Date**/S/ 
                  Peter M. Robinson
              Independent
                  Director
              March
                    29, 2007Peter
                  M. Robinson/S/ 
                  Gordon L. Ellis
              Independent
                  Director
              March
                  29, 2007Gordon
                  L. Ellis/S/ 
                  Malcolm R. Fobes III
              Independent
                  Director
              March
                  29, 2007Malcolm
                  R. Fobes III  80