**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


**FORM
      10-Q**




**x**
            **Quarterly
                report pursuant to Section 13 or 15(d) of the Securities Exchange Act
                of 1934 for the quarterly period ended September 30, 2008.**





**OR**





** ̈**
            **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) (Zip code)**




**(510)
      522-3336**


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





**N/A**


**(Former
      name, former address and former fiscal year, if changed since last report)**




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 whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.




Large
                accelerated filer  ̈
            Accelerated
                filer xNon-accelerated
                filer  ̈
            Smaller
                reporting company  ̈(Do not check if a smaller reporting company)





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




 ̈ Yes x No









**UNITED
      STATES OIL FUND, LP**





**Table
      of Contents**





****
            
            **Page****Part
                I. FINANCIAL INFORMATION**Item
                1. Condensed Financial Statements.
            
            1Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of Operations.
            
            14Item
                3. Quantitative and Qualitative Disclosures About Market
                Risk.
            
            28Item
                4. Controls and Procedures.
            
            29**Part
                II. OTHER INFORMATION**Item
                1. Legal Proceedings.
            
            30Item
                1A. Risk Factors.
            
            30Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds.
            
            30Item
                3. Defaults Upon Senior Securities.
            
            30Item
                4. Submission of Matters to a Vote of Security Holders.
            
            30Item
                5. Other Information.
            
            30Item
                6. Exhibits.
            
            30









**Part
      I.**  **FINANCIAL
      INFORMATION**




**Item 1.**  **Condensed
      Financial Statements.**




**Index
      to Condensed Financial Statements**





**Documents**
            
            **Page**Condensed
                Statements of Financial Condition at September 30, 2008 (Unaudited)
                and
                December 31, 2007
            
            2Condensed
                Schedule of Investments (Unaudited) at September 30, 2008
            
            3Condensed
                Statements of Operations (Unaudited) for the three and nine months
                ended September 30, 2008 and 2007
            
            4Condensed
                Statement of Changes in Partners’ Capital (Unaudited) for the nine months
                ended September 30, 2008
            
            5Condensed
                Statements of Cash Flows (Unaudited) for the nine months ended September
                30, 2008 and 2007
            
            6Notes
                to Condensed Financial Statements for the period ended September 30,
                2008 (Unaudited)
            
            7




1




***United
      States Oil Fund, LP***


***Condensed
      Statements of Financial Condition***


***At
      September 30, 2008 (Unaudited) and December 31, 2007***




**September 30, 2008**
            
            **December 31, 2007****Assets**Cash
                and cash equivalents
            
            $
            1,223,824,222
            
            $
            354,816,049Equity
                in UBS Securities LLC trading accounts:Cash
            
            
            477,959,474
            
            
            86,330,750Unrealized
                gain (loss) on open commodity futures contracts
            
            
            (26,658,040
            )
            
            35,705,020Receivable
                for units sold
            
            
            25,862,928
            
            
            7,581,679Interest
                receivable
            
            
            1,500,432
            
            
            962,551Other
                assets
            
            
            496,934
            
            
            420,705*Total
                assets*
            
            $
            1,702,985,950
            
            $
            485,816,754**Liabilities
                and Partners' Capital**General
                Partner management fees (Note 3)
            
            $
            495,455
            
            $
            226,782Payable
                for units redeemed
            
            
            77,731,040
            
            
            -Brokerage
                commissions payable
            
            
            53,086
            
            
            22,886Other
                liabilities
            
            
            1,142,363
            
            
            344,349*Total
                liabilities*
            
            
            79,421,944
            
            
            594,017**Commitments
                and Contingencies**(Notes 3, 4 and 5)**Partners'
                Capital**General
                Partner
            
            
            -
            
            
            -Limited
                Partners
            
            
            1,623,564,006
            
            
            485,222,737*Total
                Partners' Capital*
            
            
            1,623,564,006
            
            
            485,222,737*Total
                liabilities and partners' capital*
            
            $
            1,702,985,950
            
            $
            485,816,754Limited
                Partners' units outstanding
            
            
            20,000,000
            
            
            6,400,000Net
                asset value per unit
            
            $
            81.18
            
            $
            75.82Market
                value per unit
            
            $
            82.01
            
            $
            75.75




*See
      accompanying notes to condensed financial statements.*




2




***United
      States Oil Fund, LP***


***Condensed
      Schedule of Investments (Unaudited)***


***At
      September 30, 2008***





**Open
      Futures Contracts**





**Number of
                  Contracts**
            
            **Loss on Open
                    Commodity Contracts**
            
            **% of**
                  **Partners'
                    Capital****United States
                Contracts**Crude
                Oil Futures contracts, expire November 2008
            
            
            16,131
            
            $
            (26,658,040
            )
            
            (1.64
            )




**Cash
        Equivalents**




****
            
            **Cost**
            
            **Market Value****United
                States - Money Market Funds**Goldman
                Sachs Financial Square Funds - Government Fund
            
            $
            428,739,267
            
            $
            428,739,267
            
            
            26.41Goldman
                Sachs Financial Square Funds - Treasury Instruments Fund
            
            
            350,642,351
            
            
            350,642,351
            
            
            21.60$
            779,381,618
            
            
            779,381,618
            
            
            48.01**Cash**
            
            
            
            
            
            444,442,604
            
            
            27.37**Total
                Cash and Cash Equivalents**
            
            
            
            
            
            1,223,824,222
            
            
            75.38**Cash
                on deposit with broker**
            
            
            
            
            
            477,959,474
            
            
            29.44**Liabilities,
                less receivables and other assets**
            
            
            
            
            
            (51,561,650
            )
            
            (3.18
            )**Total
                Partners' Capital**
            
            
            
            
            $
            1,623,564,006
            
            
            100.00





*See
      accompanying notes to condensed financial statements.*




3




***United
      States Oil Fund, LP***


***Condensed
      Statements of Operations (Unaudited)***


***For
      the three months and nine months ended September 30, 2008 and
      2007***




**Three months**
              **ended**
            
            **Three months**
              **ended**
            
            **Nine Months**
              **ended**
            
            **Nine Months**
              **ended****September 30,**
              **2008**
            
            **September 30,**
              **2007**
            
            **September 30,**
              **2008**
            
            **September 30,**
              **2007****Income**Gains
                (losses) on trading of commodity futures contracts:Realized
                gains (losses) on closed positions
            
            $
            (348,770,180
            )
            $
            109,757,730
            
            $
            (52,145,750
            )
            $
            111,008,840Change
                in unrealized gains (losses) on open positions
            
            
            (39,303,880
            )
            
            (22,790,310
            )
            
            (62,363,060
            )
            
            47,194,880Interest
                income
            
            
            5,868,040
            
            
            7,187,424
            
            
            12,213,272
            
            
            30,175,872Other
                income
            
            
            78,000
            
            
            73,000
            
            
            227,000
            
            
            231,000*Total
                income (loss)*
            
            
            (382,128,020
            )
            
            94,227,844
            
            
            (102,068,538
            )
            
            188,610,592**Expenses**General
                Partner management fees (Note 3)
            
            
            1,364,008
            
            
            721,676
            
            
            2,805,644
            
            
            3,007,089Brokerage
                commissions
            
            
            391,467
            
            
            194,908
            
            
            891,642
            
            
            951,049Other
                expenses
            
            
            508,069
            
            
            272,947
            
            
            1,815,260
            
            
            1,081,089*Total
                expenses*
            
            
            2,263,544
            
            
            1,189,531
            
            
            5,512,546
            
            
            5,039,227**Net
                income (loss)**
            
            $
            (384,391,564
            )
            $
            93,038,313
            
            $
            (107,581,084
            )
            $
            183,571,365**Net
                income (loss) per limited partnership unit**
            
            $
            (32.13
            )
            $
            9.48
            
            $
            5.36
            
            $
            10.79**Net
                income (loss) per weighted average limited partnership
                unit**
            
            $
            (28.35
            )
            $
            9.35
            
            $
            (12.17
            )
            $
            11.46**Weighted
                average limited partnership units outstanding**
            
            
            13,558,696
            
            
            9,945,652
            
            
            8,841,606
            
            
            16,017,949




*See
      accompanying notes to condensed financial statements.*




4




***United
      States Oil Fund, LP***


***Condensed
      Statement of Changes in Partners' Capital (Unaudited)***


***For
      the nine months ended September 30, 2008***





**General**
              **Partner**
            
            **Limited Partners**
            
            **Total****Balances,
                at December 31, 2007**
            
            $
            -
            
            $
            485,222,737
            
            $
            485,222,737Addition
                of 98,300,000 partnership units
            
            
            -
            
            
            8,858,859,292
            
            
            8,858,859,292Redemption
                of 84,700,000 partnership units
            
            
            -
            
            
            (7,612,936,939
            )
            
            (7,612,936,939
            )Net
                loss
            
            
            -
            
            
            (107,581,084
            )
            
            (107,581,084
            )**Balances,
                at September 30, 2008**
            
            $
            -
            
            $
            1,623,564,006
            
            $
            1,623,564,006**Net
                Asset Value Per Unit**At
                December 31, 2007
            
            $
            75.82At
                September 30, 2008
            
            $
            81.18





*See
      accompanying notes to condensed financial statements.*




5




***United
      States Oil Fund, LP***


***Condensed
      Statements of Cash Flows (Unaudited)***


***For
      the nine months ended September 30, 2008 and 2007***




**Nine months ended**
            
            **Nine months ended****September 30, 2008**
            
            **September 30, 2007****Cash
                Flows from Operating Activities:**Net
                income (loss)
            
            $
            (107,581,084
            )
            $
            183,571,365Adjustments
                to reconcile net income (loss) to net cash provided by (used in)
                operating
                activities(Increase)
                decrease in commodity futures trading account – cash
            
            
            (391,628,724
            )
            
            35,805,017Unrealized
                (gains) losses on futures contracts
            
            
            62,363,060
            
            
            (47,194,880
            )(Increase)
                decrease in interest receivable and other assets
            
            
            (614,110
            )
            
            1,390,231Increase
                (decrease) in management fees payable
            
            
            268,673
            
            
            (137,886
            )Increase
                (decrease) in commissions payable
            
            
            30,200
            
            
            (21,500
            )Increase
                in other liabilities
            
            
            798,014
            
            
            155,674*Net
                cash provided by (used in) operating activities*
            
            
            (436,363,971
            )
            
            173,568,021**Cash
                Flows from Financing Activities:**Subscription
                of partnership units
            
            
            8,840,578,043
            
            
            2,858,056,667Redemption
                of partnership units
            
            
            (7,535,205,899
            )
            
            (3,344,005,164
            )*Net
                cash provided by (used in) financing activities*
            
            
            1,305,372,144
            
            
            (485,948,497
            )**Net
                Increase (Decrease) in Cash and Cash Equivalents**
            
            
            869,008,173
            
            
            (312,380,476
            )**Cash
                and Cash Equivalents**, beginning of period
            
            
            354,816,049
            
            
            712,883,812**Cash
                and Cash Equivalents**, end of period
            
            $
            1,223,824,222
            
            $
            400,503,336




*See
      accompanying notes to condensed financial statements.*




6




**United** **States Oil Fund, LP**


**Notes
      to Condensed Financial Statements**


**For
      the period ended September 30, 2008 (Unaudited)**




**NOTE
      1 - ORGANIZATION AND BUSINESS**




The
      United States Oil Fund, LP (“USOF”) was organized as a limited partnership under
      the laws of the state of Delaware on May 12, 2005. USOF is a commodity pool
      that
      issues units that may be purchased and sold on the American Stock Exchange
      (the “AMEX”). USOF will continue in perpetuity, unless terminated sooner upon
      the occurrence of one or more events as described in its Fifth Amended and
      Restated Agreement of Limited Partnership dated as of October 13, 2008 (the
“LP
      Agreement”). The investment objective of USOF is for the changes in percentage
      terms of its net asset value to reflect the changes in percentage terms of
      the
      price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured
      by
      the changes in the price of the futures contract on light, sweet crude oil
      as
      traded on the New York Mercantile Exchange (the “NYMEX”) 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 contract to expire, less USOF’s expenses. USOF accomplishes
      its objective through investments in futures contracts for light, sweet
      crude oil, and other types of crude oil, heating oil, gasoline, natural gas
      and
      other petroleum-based fuels that are traded on the NYMEX, ICE Futures or other
      U.S. and foreign exchanges (collectively, “Oil Futures Contracts”) and
      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 crude oil, heating oil, gasoline, natural gas and other
      petroleum-based fuels, Oil Futures Contracts and indices based on the foregoing
      (collectively, “Other Oil Interests”). As of September 30, 2008, USOF held
      16,131 Oil Futures Contracts traded on the NYMEX.





USOF
      commenced investment operations on April 10, 2006 and has a fiscal year ending
      on December 31. United States Commodity Funds LLC (formerly known as Victoria
      Bay Asset Management, LLC) (the “General Partner”) is responsible for the
      management of USOF. The General Partner is a member of the National Futures
      Association (the “NFA”) and became a commodity pool operator with the
      Commodity Futures Trading Commission effective December 1, 2005. The General
      Partner is also the general partner of the United States Natural Gas Fund,
      LP
      (“USNG”), the United States 12 Month Oil Fund, LP (“US12OF”), the United
      States Gasoline Fund, LP (“USG”) and the United States Heating Oil Fund, LP
      (“USHO”), which listed their limited partnership units on the AMEX under the
      ticker symbols “UNG” on April 18, 2007, “USL” on December 6, 2007,
“UGA” on February 26, 2008 and “UHN” on April 9, 2008, respectively.




The
      accompanying unaudited condensed financial statements have been prepared in
      accordance with Rule 10-01 of Regulation S-X promulgated by the U.S. Securities
      and Exchange Commission (the “SEC”) and, therefore, do not include all
      information and footnote disclosure required under accounting principles
      generally accepted in the United States of America.  The financial
      information included herein is unaudited, however, such financial information
      reflects all adjustments which are, in the opinion of management, necessary
      for
      the fair presentation of the condensed financial statements for the interim
      period.





USOF
      issues limited partnership interests (“units”) to certain authorized purchasers
      (“Authorized Purchasers”) by offering baskets consisting of 100,000 units
      (“Creation Baskets”) through ALPS Distributors, Inc. (the “Marketing
      Agent”). The purchase price for a Creation Basket is based upon the net asset
      value of a unit determined as of the earlier of the close of the New York
      Stock Exchange (the “NYSE”) or 4:00 p.m. New York time on the day the order to
      create the basket is properly received.





In
      addition, Authorized Purchasers pay USOF a $1,000 fee for each order
      to create one or more Creation Baskets. Units may be purchased or sold
      on a nationally recognized securities exchange in smaller increments than a
      Creation Basket. Units purchased or sold on a nationally recognized securities
      exchange are not purchased or sold at the net asset value of USOF but rather
      at
      market prices quoted on such exchange.





In
      April
      2006, USOF initially registered 17,000,000 units on Form S-1 with the SEC.
      On
      April 10, 2006, USOF listed its units on the AMEX under the ticker symbol “USO”.
      On that day, USOF established its initial net asset value by setting the
      price at $67.39 per unit and issued 200,000 units in exchange for $13,479,000.
      USOF also commenced investment operations on April 10, 2006 by purchasing Oil
      Futures Contracts traded on the NYMEX based on light, sweet crude
      oil.  As of September 30, 2008, USOF had registered a total of 327,000,000
      units.




7




**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 condensed statement of financial
      condition and in the difference between the original contract amount and the
      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 condensed financial
      statements. Changes in the unrealized gains or losses between periods are
      reflected in the condensed statement of operations. USOF earns interest on
      its assets denominated in U.S. dollars on deposit with the futures commission
      merchant at the overnight Federal Funds Rate less 32 basis points. In
      addition, USOF earns interest on funds held at the custodian at prevailing
      market rates earned on such investments.





**Brokerage
      Commissions**





Brokerage
      commissions on all open commodity futures contracts are accrued on a full-turn
      basis.




**Income
      Taxes**





USOF
      is
      not subject to federal income taxes; each partner reports its allocable share
      of
      income, gain, loss deductions or credits on its own income tax
      return.




**Creations
      and Redemptions**





Authorized
      Purchasers may purchase units (“Creation Baskets”) or redeem units (“Redemption
      Baskets”) only in blocks of 100,000 units equal to the net asset value of the
      units determined as of the earlier of the close of the NYSE or 4:00 p.m. New
      York time on the day the order is placed.





USOF
      records units sold or redeemed one business day after the trade date of the
      purchase or redemption. The amounts due from Authorized Purchasers are reflected
      in USOF’s condensed statement of financial condition as receivable for units
      sold, and amounts payable to Authorized Purchasers upon redemption are reflected
      as payable for units redeemed.




**Partnership
      Capital and Allocation of Partnership Income and Losses**





Profit
      or
      loss is allocated among the partners of USOF 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
      LP Agreement.





**Calculation
      of Net Asset Value**





USOF
      calculates its 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. USOF uses the closing
      price for the contracts on the relevant exchange on that day to determine the
      value of contracts held on such exchange.




**Net
      Income (Loss) per Unit**





Net
      income (loss) per unit is the difference between the net asset value per
      unit at the beginning of each period and at the end of each period. The
      weighted average number of units outstanding was computed for purposes of
      disclosing net income (loss) per weighted average unit. The weighted average
      units are equal to the number of units outstanding at the end of the period,
      adjusted proportionately for units redeemed based on the amount of time the
      units were outstanding during such period. There were no units held by the
      General Partner at September 30, 2008.




8


**Offering
      Costs**





Offering
      costs incurred in connection with the registration of additional units after
      the
      initial registration of units are borne by USOF. These costs include
      registration fees paid to regulatory agencies and all legal, accounting,
      printing and other expenses associated therewith. These costs will be accounted
      for as a deferred charge and thereafter amortized to expense over twelve months
      on a straight-line basis or a shorter period if warranted.




**Cash
      Equivalents**





Cash
      and
      cash equivalents include money market funds and overnight deposits or time
      deposits with original maturity dates of three months or less.





**Use
      of Estimates**





The
      preparation of condensed financial statements in conformity with accounting
      principles generally accepted in the United States of America requires USOF’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 condensed financial statements, and the reported amounts of
      the
      revenue and expenses during the reporting period. Actual results could differ
      from those estimates and assumptions.




**NOTE 3
      - FEES PAID BY USOF AND RELATED PARTY TRANSACTIONS**





**General
      Partner Management Fee**




Under
      the
      LP Agreement, the General Partner is responsible for investing the assets of
      USOF in accordance with the objectives and policies of USOF. 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 USOF. For these services, USOF is contractually obligated to pay
      the
      General Partner a fee, which is paid monthly and based on average daily net
      assets, that is equal to 0.50% per annum on average daily net assets of
      $1,000,000,000 or less and 0.20% per annum on average daily net assets that
      are
      greater than $1,000,000,000. As of January 1, 2009, this fee will change to
      0.45% per annum on all average daily net assets.




**Ongoing
      Registration Fees and Other Offering Expenses**




USOF pays
      all costs and expenses associated with the ongoing registration of units
      subsequent to the initial offering. These costs include registration or other
      fees paid to regulatory agencies in connection with the offer and sale of units,
      and all legal, accounting, printing and other expenses associated with such
      offer and sale. For the nine month periods ended September 30, 2008 and
      2007, USOF incurred $393,787 and $384,058, respectively, in registration fees
      and other offering expenses.




**Directors’
      Fees**




USOF
      is
      responsible for paying the fees and expenses, including directors’ and officers’
liability insurance, of the independent directors of the General Partner who
      are
      also audit committee members. USOF shares these fees with USNG, US12OF, USG
      and USHO based on the relative assets of each fund, computed on a daily basis.
      These fees for the calendar year 2008 are estimated to be a total of $286,000
      for all five funds.





**Licensing
      Fees**





As
      discussed in Note 4, USOF entered into a licensing agreement with the NYMEX
      on May 30, 2007. The agreement has an effective date of April 10, 2006. Pursuant
      to the agreement, USOF and the affiliated funds managed by the General Partner
      pay a licensing fee that is equal to 0.04% for the first $1,000,000,000 of
      combined assets of the funds and 0.02% for combined assets above $1,000,000,000.
      During the nine month periods ended September 30, 2008 and 2007, USOF incurred
      $194,845 and $314,175 under this arrangement.


9


**Investor
      Tax Reporting Cost**




The
      fees
      and expenses associated with USOF’s tax accounting and reporting requirements,
      with the exception of certain initial implementation service fees and base
      service fees which were borne by the General Partner, are paid by
      USOF. These costs are estimated to be $928,749 for the year ending December
      31, 2008.




**Other
      Expenses and Fees**




In
      addition to the fees described above, USOF pays all brokerage fees, taxes
      and other expenses in connection with the operation of USOF, excluding costs
      and
      expenses paid by the General Partner as outlined in Note 4.





**NOTE
      4 - CONTRACTS AND AGREEMENTS**





USOF
      is
      party to a marketing agent agreement, dated as of March 13, 2006, with the
      Marketing Agent, whereby the Marketing Agent provides certain marketing services
      for USOF 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: 0.00% on USOF’s assets from $0 - $500 million;
      0.04% on USOF’s assets from $500 million - $4 billion; and 0.03% on USOF’s
      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.





USOF
      is
      also party to a custodian agreement, dated March 13, 2006, with Brown Brothers
      Harriman & Co. (“BBH&Co.”), whereby BBH&Co. holds investments on
      behalf of USOF. The General Partner pays the fees of the custodian, which
      are determined by the parties from time to time. In addition, USOF is party
      to
      an administrative agency agreement, dated March 13, 2006, with the General
      Partner and BBH&Co., whereby BBH&Co. acts as the administrative agent,
      transfer agent and registrar for USOF. The General Partner also pays the fees
      of
      BBH&Co. for its services under this agreement and such fees are determined
      by the parties from time to time.





Currently,
      the General Partner pays BBH&Co. for its services, in the foregoing
      capacities, the greater of a minimum of $125,000 annually or an asset-based
      charge of (a) 0.06% for the first $500 million of USOF’s, USNG’s, US12OF’s,
      USG’s and USHO’s combined net assets, (b) 0.0465% for USOF’s, USNG’s, US12OF’s,
      USG’s and USHO’s combined net assets greater than $500 million but less than $1
      billion, and (c) 0.035% for USOF’s, USNG’s, US12OF’s, USG’s and USHO’s combined
      net assets in excess of $1 billion. The General Partner also pays a $25,000
      annual fee for the transfer agency services and transaction fees ranging from
      $7.00 to $15.00 per transaction.





USOF
      has
      entered into a brokerage agreement with UBS Securities LLC (“UBS Securities”).
      The agreement requires UBS Securities to provide services to USOF in connection
      with the purchase and sale of Oil Futures Contracts and Other Oil Interests
      that
      may be purchased and sold by or through UBS Securities for USOF’s account. The
      agreement provides that UBS Securities charge USOF commissions of approximately
      $7 per round-turn trade, plus applicable exchange and NFA fees for Oil Futures
      Contracts and options on Oil Futures Contracts.





USOF
      invests primarily in Oil Futures Contracts traded on the NYMEX. On May 30,
      2007,
      USOF and the NYMEX entered into a license agreement whereby USOF was granted
      a
      non-exclusive license to use certain of the NYMEX’s settlement prices and
      service marks. The agreement has an effective date of April 10, 2006. Under
      the license agreement, USOF and the affiliated funds managed by the General
      Partner pay the NYMEX an asset-based fee for the license, the terms of which
      are
      described in Note 3.





USOF
      expressly disclaims any association with the NYMEX or endorsement of USOF by
      the
      NYMEX and acknowledges that “NYMEX” and “New York Mercantile Exchange” are
      registered trademarks of the NYMEX.


10


**NOTE
      5 - FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISKS AND
      CONTINGENCIES**





USOF engages
      in the speculative trading of futures contracts and options on futures contracts
      (collectively, “derivatives”). USOF 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 USOF 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, USOF must rely solely on the credit of its respective individual
      counterparties. However, in the future, if USOF 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. USOF also has credit risk since the sole counterparty to all domestic
      and foreign futures contracts is the exchange on which the relevant
      contracts are traded. In addition, USOF bears the risk of financial failure
      by
      the clearing broker.




The
      purchase and sale of futures and options on futures contracts require margin
      deposits with a futures commission merchant. Additional deposits may be
      necessary for any loss on contract value. The Commodity Exchange Act requires
      a
      futures commission merchant to segregate all customer transactions and assets
      from the futures commission merchant’s proprietary activities.





USOF’s
      cash and other property, such as U.S. Treasuries, deposited with a futures
      commission merchant are considered commingled with all other customer funds
      subject to the futures commission merchant’s segregation requirements. In the
      event of a futures commission merchant’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. The insolvency of a futures commission merchant could result in
      the
      complete loss of USOF’s assets posted with that futures commission merchant;
      however, the vast majority of USOF’s assets are held in Treasuries, cash and/or
      cash equivalents with USOF’s custodian and would not be impacted by the
      insolvency of a futures commission merchant. Also, the failure or insolvency
      of
      USOF’s custodian could result in a substantial loss of USOF’s
      assets.




USOF
      invests its cash in money market funds that seek to maintain a stable net asset
      value. USOF is exposed to any risk of loss associated with an investment in
      these money market funds. As of September 30, 2008 and December 31, 2007, USOF
      had deposits in domestic and foreign financial institutions, including cash
      investments in money market funds, in the amounts of $1,701,783,696 and
      $441,146,799, respectively. This amount is subject to loss should these
      institutions cease operations.




For
      derivatives, risks arise from changes in the market value of the contracts.
      Theoretically, USOF 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, USOF 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.





USOF’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, USOF has a policy of requiring
      review of the credit standing of each broker or counterparty with which it
      conducts business.




The
      financial instruments held by USOF are reported in its condensed
      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.




**NOTE 6
      - FINANCIAL HIGHLIGHTS**





The
      following table presents per unit performance data and other supplemental
      financial data for the nine months ended September 30, 2008 and 2007 for the
      limited partners. This information has been derived from information presented
      in the condensed financial statements.


11





**For the nine**
              **months ended**
            
            **For the nine**
              **months ended****September 30, 2008**
            
            **September 30, 2007****(Unaudited)**
            
            **(Unaudited)****Per Unit
                Operating Performance:**Net
                asset value, beginning of period
            
            $
            75.82
            
            $
            51.87Total
                income
            
            
            5.98
            
            
            11.10Total
                expenses
            
            
            (0.62
            )
            
            (0.31
            )Net
                increase in net asset value
            
            
            5.36
            
            
            10.79Net
                asset value, end of period
            
            $
            81.18
            
            $
            62.66**Total
                Return**
            
            
            7.07
            %
            
            20.80
            %**Ratios
                to Average Net Assets**Total
                income (loss)
            
            
            (12.59
            )%
            
            23.14
            %Expenses
                excluding management fees*
            
            
            (0.45
            )%
            
            (0.33
            )%Management
                fees*
            
            
            (0.46
            )%
            
            (0.50
            )%Net
                income (loss)
            
            
            (13.27
            )%
            
            22.52
            %*Annualized




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 to and withdrawals
      from USOF.





**NOTE 7 –
      RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS**





**Fair
      Value of Financial Instruments**




Effective
      January 1, 2008, USOF adopted FAS 157 - Fair Value Measurements (“FAS 157” or
      the “Statement”). FAS 157 defines fair value, establishes a framework for
      measuring fair value in generally accepted accounting principles (“GAAP”), and
      expands disclosures about fair value measurement. The changes to current
      practice resulting from the application of the Statement relate to the
      definition of fair value, the methods used to measure fair value, and the
      expanded disclosures about fair value measurement. The Statement establishes
      a
      fair value hierarchy that distinguishes between (1) market participant
      assumptions developed based on market data obtained from sources independent
      of
      USOF (observable inputs) and (2) USOF’s own assumptions about market participant
      assumptions developed based on the best information available under the
      circumstances (unobservable inputs). The three levels defined by the FAS 157
      hierarchy are as follows:




Level
      I
**–** Quoted prices (unadjusted) in active markets for *identical* assets
      or liabilities that the reporting entity has the ability to access at the
      measurement date.




Level
      II
**–** Inputs other than quoted prices included within Level 1
      that
      are observable for the asset or liability, either directly or indirectly. Level
      II assets include the following: quoted prices for *similar* assets
      or liabilities in active markets, quoted prices for identical or similar assets
      or liabilities in markets that are not active, inputs other than quoted prices
      that are observable for the asset or liability, and inputs that are derived
      principally from or corroborated by observable market data by correlation or
      other means (market-corroborated inputs).




Level
      III
**–** Unobservable pricing input at the measurement date for the
      asset or liability. Unobservable inputs shall be used to measure fair value
      to
      the extent that observable inputs are not available.


12


In
      some
      instances, the inputs used to measure fair value might fall in different levels
      of the fair value hierarchy. The level in the fair value hierarchy within which
      the fair value measurement in its entirety falls shall be determined based
      on
      the lowest input level that is significant to the fair value measurement in
      its
      entirety.




The
      following table summarizes the valuation of USOF’s securities at September 30,
      2008 using the fair value hierarchy:


**At September
                  30, 2008**
              
              **Total**
              
              **Level I**
              
              **Level II**
              
              **Level III**Investments
              
              $
              779,381,618
              
              $
              779,381,618
              
              $
              -
              
              $
              -Derivative
                  assets
              
              
              (26,658,040
              )
              
              (26,658,040
              )
              
              -
              
              
              -





**NOTE 8 –
      SUBSEQUENT EVENTS**




On
      September 18. 2008, USOF announced that it would transfer the listing of its
      limited partnership units that are listed on the AMEX to the NYSE Arca, Inc.
      in
      connection with NYSE Euronext’s acquisition of the AMEX. USOF expects that the
      listing transfer will occur sometime during the fourth quarter of
      2008.


13


**Item 2.**  **Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.**




The
      following discussion should be read in conjunction with the condensed financial
      statements and the notes thereto of the United States Oil Fund, LP (“USOF”)
      included elsewhere in this quarterly report on Form 10-Q.




*Forward-Looking
      Information*




This
      quarterly report on Form 10-Q, including this “Management’s Discussion and
      Analysis of Financial Condition and Results of Operations,” 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 that may cause USOF’s 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
      USOF’s future plans, strategies and expectations, are generally identifiable by
      use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,”
“believe,” “intend” or “project,” the negative of these words, other
      variations on these words or comparable terminology. These forward-looking
      statements are based on assumptions that may be incorrect, and USOF cannot
      assure investors that the projections included in these forward-looking
      statements will come to pass. USOF’s actual results could differ materially from
      those expressed or implied by the forward-looking statements as a result of
      various factors.




USOF
      has
      based the forward-looking statements included in this quarterly report on Form
      10-Q on information available to it on the date of this quarterly report on
      Form
      10-Q, and USOF assumes no obligation to update any such forward-looking
      statements. Although USOF undertakes 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 USOF may make directly to them or through reports that USOF in the
      future files with the U.S. Securities and Exchange Commission (the “SEC”),
      including annual reports on Form 10-K, quarterly reports on Form 10-Q and
      current reports on Form 8-K.




**Introduction**





USOF,
      a
      Delaware limited partnership, is a commodity pool that issues units that
      may be purchased and sold the American Stock Exchange (the “AMEX”). On September
      18, 2008, USOF announced that it would transfer the listing of its limited
      partnership units that are listed on the AMEX to the NYSE Arca, Inc. in
      connection with NYSE Euronext’s acquisition of the AMEX. USOF expects that the
      listing transfer will occur sometime during the fourth quarter of 2008. The
      investment objective of USOF is for changes in percentage terms of its
      units’ net asset value (“NAV”) on a daily basis to reflect the changes
      in percentage terms in the spot price of light, sweet crude oil delivered
      to Cushing, Oklahoma, also on a daily basis, as measured by the changes in
      the
      price of the futures contract on light, sweet crude oil as traded on the New
      York Mercantile Exchange (the “NYMEX”) 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 contract to expire,
      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 its NAV, measured
      in percentage terms, will closely track the changes in the price of a
      specified oil futures contract (the “Benchmark Oil Futures Contract”), also
      measured in percentage terms. USOF’s general partner believes the Benchmark Oil
      Futures Contract historically has exhibited a close correlation with the spot
      price of light, sweet crude oil. It is not the intent of USOF to be
      operated in a fashion such that the NAV will equal, in dollar terms, the spot
      price of light, sweet crude oil or any particular futures contract based
      on light, sweet crude oil. 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.




On
      any
      valuation day, the Benchmark Oil Futures Contract is the near month futures
      contract for light, sweet crude oil traded on the NYMEX 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 light, sweet crude oil traded on the NYMEX. “Near month contract” means
      the next contract traded on the NYMEX due to expire. “Next month contract” means
      the first contract traded on the NYMEX due to expire after the near month
      contract.


14


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
      NYMEX, ICE Futures 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”). For convenience and unless otherwise specified, Oil Futures
      Contracts and Other Oil Interests collectively are referred to as “Oil
      Interests” in this quarterly report on Form 10-Q.





The
      general partner of USOF, United States Commodity Funds LLC (formerly, Victoria
      Bay Asset Management, LLC) (the “General Partner”), which is registered as
      a commodity pool operator (“CPO”) with the U.S. Commodity Futures Trading
      Commission (the “CFTC”), is authorized by the Fifth Amended and Restated
      Agreement of Limited Partnership of USOF (the “LP Agreement”) to manage
      USOF. The General Partner is authorized by USOF in its sole judgment to employ
      and establish the terms of employment for, and termination of, commodity trading
      advisors or futures commission merchants.




**Valuation
      of 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 (the “NYSE”) 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 NYSE typically closes at 4:00 p.m. New York
      time. USOF uses the NYMEX closing price (determined at the earlier of the close
      of the NYMEX or 2:30 p.m. New York time) for the contracts held on the
      NYMEX, but calculates or determines the value of all other USOF investments,
      including ICE Futures contracts or other futures contracts, as of the earlier
      of
      the close of the NYSE or 4:00 p.m. New York time.





**Management’s
      Discussion of Results of Operations and the Crude Oil
      Market**





*Results
      of Operations.* On
      April 10, 2006, USOF listed its units on the AMEX 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 $13,479,000 in cash.




Since
      its
      initial offering of 17,000,000 units, USOF has made five subsequent offerings
      of
      its units: 30,000,000 units that were registered with the SEC on October
      18, 2006, 50,000,000 units that were registered with the SEC on January 30,
      2007, 30,000,000 units that were registered with the SEC on December
      4, 2007, 100,000,000 units that were registered with the SEC on February 7,
      2008
      and an additional 100,000,000 units that were registered with the SEC on
      September 29, 2008. Units offered by USOF in subsequent offerings were sold
      by
      it for cash at the units’ NAV as described in the applicable prospectus. As of
      September 30, 2008, USOF had issued 205,700,000 units, 20,000,000 of which
      were
      outstanding. As of September 30, 2008 there were 121,300,000 units registered
      but not yet issued.





More
      units may have been issued by USOF than are outstanding due to the redemption
      of
      units. Unlike funds that are registered under the Investment Company Act of
      1940, as amended, units that have been redeemed by USOF cannot be resold by
      USOF. As a result, USOF contemplates that additional offerings of its units
      will
      be registered with the SEC in the future in anticipation of additional issuances
      and redemptions.




As
      of
      September 30, 2008, the total unrealized loss on Oil Futures Contracts
      owned or held on that day was $26,658,040 and USOF established cash deposits,
      including cash investments in money market funds, that were equal to
      $1,701,783,696. The majority of cash assets were held in overnight deposits
      at
      USOF’s custodian bank, while 28.09% of the cash balance was held with the
      futures commission merchant as margin deposits for the Oil Futures Contracts
      purchased. The ending per unit NAV on September 30, 2008 was
      $81.18.




*Portfolio
      Expenses* .
      USOF’s
      expenses consist of investment management fees, brokerage fees and
      commissions, certain offering costs, licensing fees and the fees and expenses
      of
      the independent directors of the General Partner. The management 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 management
      fee is 0.50%. For total net assets over $1 billion, the management fee is 0.20%
      on the incremental amount of assets. The fee is accrued daily.


15


During
      the nine month period ended September 30, 2008, the daily average total net
      assets of USOF were $810,780,060. During the nine month period ended
      September 30, 2008, the total net assets of USOF did exceed $1 billion. The
      management fee paid by USOF during the period amounted to $2,805,644. Management
      fees as a percentage of total net assets averaged 0.46% over the course of
      this
      nine month period. By comparison, for the nine month period ended September
      30,
      2007, the average daily total net assets of USOF were $815,003,993. During
      the
      nine month period ended September 30, 2007, the total net assets of USOF did
      exceed $1 billion on a number of days. The management fee paid by USOF for
      this
      nine month period amounted to $3,007,089, which was calculated at the 0.50%
      rate
      for total net assets up to and including $1 billion and at the rate of 0.20%
      on
      average net assets over $1 billion, and accrued daily. Management fees as a
      percentage of average net assets averaged 0.50% over the course of this nine
      month period. Beginning January 1, 2009, the management fee paid by USOF will
      be
      calculated at the rate of 0.45% for all total net assets and accrue
      daily.





USOF pays
      for all brokerage fees, taxes and other expenses, including certain tax
      reporting costs, licensing fees for the use of intellectual property, ongoing
      registration or other fees paid to the SEC, the Financial Industry Regulatory
      Authority (“FINRA”) and any other regulatory agency in connection with
      offers and sales of its units subsequent to the initial offering and all legal,
      accounting, printing and other expenses associated therewith.  For the nine
      month period ended September 30, 2008, USOF incurred $393,787 in ongoing
      registration fees and other offering expenses. USOF is responsible for paying
      the fees and expenses, including directors’ and officers’ liability insurance,
      of the independent directors of the General Partner who are also audit committee
      members. USOF shares these fees with USNG, US12OF, USG and USHO based
      on the relative assets of each fund computed on a daily basis. These fees for
      calendar year 2008 are estimated to be a total of $286,000 for all five funds.
      By comparison, for the nine month period ended September 30, 2007,
      USOF incurred $384,058 in ongoing registration fees and other offering
      expenses. In addition, USOF agreed to pay the independent directors $184,000
      to
      cover their expenses and pay for their services for 2007.





USOF
      also
      incurs commissions to brokers for the purchase and sale of Oil Futures
      Contracts, Other Oil Interests or short-term obligations of the United
      States of two years or less (“Treasuries”). During the nine month period ended
      September 30, 2008, total commissions paid to brokers amounted to $891,642.
      Prior to the initial offering of its units, USOF had estimated that its annual
      level of such commissions was expected to be 0.35% of total net assets. As
      an annualized percentage of average net assets, the figure for the nine
      month period ended September 30, 2008 represented approximately 0.15% of average
      net assets. By comparison, for the nine month period ended September 30, 2007,
      total commissions paid amounted to $951,049. As an annualized percentage of
      average net assets, the figure for the nine month period ended September 30,
      2007 represented approximately 0.16% of average net assets. However, there
      can
      be no assurance that commission costs and portfolio turnover will not cause
      commission expenses to rise in future quarters.





*Interest
      Income* .
      USOF
      seeks to invest its assets such that it holds 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 Treasuries, cash and/or cash equivalents.
      This includes both the amount on deposit with the futures commission merchant
      as
      margin, as well as unrestricted cash held with USOF’s custodian bank.
      The Treasuries, cash and/or cash equivalents earn interest that
      accrues on a daily basis. For the nine month period ended September 30, 2008,
      USOF earned $12,213,272 in interest income on such cash holdings. Based on
      USOF’s average daily total net assets during this time period, this is
      equivalent to an annualized yield of 2.01%. USOF did not
      purchase Treasuries during the nine month period ended September 30, 2008
      and held all of its funds in cash and/or cash equivalents during this time
      period. By comparison, for the nine month period ended September 30, 2007,
      USOF
      earned $30,175,872 in interest income on cash holdings. Based on USOF’s average
      daily total net assets during this time period, this is equivalent to an
      annualized yield of 4.95%.





*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 of the 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 period of 30
      valuation days, 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 or the spot price
      for crude oil. Management believes that it is not practical to manage the
      portfolio to achieve such an investment goal when investing in listed Oil
      Futures Contracts.


16


For
      the
      30 valuation days ended September 30, 2008, the simple average daily change
      in
      the Benchmark Oil Futures Contract was (0.323)%, while the simple average daily
      change in the NAV of USOF over the same time period was (0.319)%. The average
      daily difference was 0.004% (or 0.4 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 0.8%, meaning
      that
      over this time period USOF’s tracking error was within the plus or minus 10%
      range established as its benchmark tracking goal.











****PAST
      PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
      RESULTS***


17











****PAST
      PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
      RESULTS***





Since
      the
      offering of USOF units to the public on April 10, 2006 to September 30,
      2008, the simple average daily change in the Benchmark Oil Futures Contract
      was
      0.041%, while the simple average daily change in the NAV of USOF over the same
      time period was 0.050%. The average daily difference was 0.009% (or 0.9 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 2.432%, 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 Oil Futures Contract 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 Oil Futures Contract.




For
      the
      nine month period ended September 30, 2008, the actual total return of USOF
      as
      measured by changes in its NAV was 7.07%. This is based on an initial
      NAV of $75.82 on December 31, 2007 and an ending NAV as of September
      30, 2008 of $81.18. 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 Contract,
      USOF would have ended the third quarter of 2008 with an estimated NAV of
      $80.46, for a total return over the relevant time period of 6.13%. The
      difference between the actual NAV total return of USOF of 7.07% and the expected
      total return based on the Benchmark Oil Futures Contract of 6.13% was an error
      over the time period of 0.94%, which is to say that USOF’s actual total return
      exceeded the benchmark result by that percentage. Management believes that
      a
      portion 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 nine month period
      ended September 30, 2008, 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.


18


By
      comparison, for the nine month period ended September 30, 2007, the actual
      total
      return of USOF as measured by changes in its NAV was 20.80%. This was based
      on
      an initial NAV of $51.87 on January 1, 2007 and an ending NAV as of
      September 30, 2007 of $62.66. 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 Contract, USOF would have ended the third quarter of 2007 with an
      estimated NAV of $60.76, for a total return over the relevant time period of
      17.14%. The difference between the actual NAV total return of USOF of 20.80%
      and
      the expected total return based on the Benchmark Oil Futures Contract of 17.14%
      was an error over the time period of 3.66%, which is to say that USOF’s actual
      total return exceeded the benchmark result by that percentage. Management
      believes that a portion 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
      nine month period ended September 30, 2007, 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.





There
      are
      currently three factors that have impacted, during the latest period, or are
      most likely to impact, USOF’s ability to accurately track its Benchmark Oil
      Futures Contract.





First, USOF
      may buy or sell 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 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. During the
      nine
      month period ended September 30, 2008, management attempted to minimize the
      effect of these transactions by seeking to execute its purchases or sales of
      the
      Benchmark Oil Futures Contracts at, or as close as possible to, the end of
      the
      day settlement price. However, it may not always be 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.





Second,
      USOF earns interest on its cash, cash equivalents and Treasury holdings.
      USOF is not required to distribute any portion of its income to its unitholders
      and did not make any distributions to unitholders during the nine month period
      ended September 30, 2008. 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 management fee, brokerage commissions and other
      expenses (including ongoing registration fees, licensing fees and the fees
      and expenses of the independent directors of the General Partner), 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 Contract.
      During the nine month period ended September 30, 2008, USOF earned, on an
      annualized basis, approximately 2.01% on its cash holdings. It also incurred
      cash expenses on an annualized basis of 0.46% for management fees and
      approximately 0.15% in brokerage commission costs related to the purchase and
      sale of futures contracts, and 0.30% for other expenses. The foregoing fees
      and
      expenses resulted in a net yield on an annualized basis of approximately 1.10%
      and 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 management 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 Oil Futures Contract.




Third, USOF
      may hold Other Oil Interests in its portfolio that may fail to closely
      track the Benchmark Oil Futures Contract’s total return movements. In that case,
      the error in tracking the benchmark could 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 the nine month period ended September 30, 2008, USOF did
      not
      hold any Other Oil Interests. However, there can be no assurance that in future
      quarters USOF will not make use of such Other
      Oil Interests.


19


During
      the nine month period ended September 30, 2008, the prices of front month
      Benchmark Oil Futures Contracts rose from near the $96.00 level to approximately
      the $100.60 level. The prices of front month contracts were also higher than
      the
      prices of second month contracts for most of the first quarter of 2008 and
      the
      first half of the second quarter of 2008. The price of the front month contract
      was less than the second month contract for the balance of the second quarter
      of
      2008 and most of the third quarter of 2008, although the front month price
      finished the end of the third quarter of 2008 higher than the second month
      contract.




*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 from
      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 later month contracts. For example, if the price of
      the
      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), then absent any
      other change there is a tendency for the price of a next month contract to
      decline in value as it becomes the 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 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 in reaction to a number of market factors. If investors seek to
      maintain their position in a near month contract and not take delivery of the
      oil, every month they must sell their current near month contract 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 crude oil in the future would be less, the investor would
      be buying a next month contract 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 Treasuries, cash and/or cash
      equivalents), 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 would 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 a next month
      contract 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 spot price of 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 $40. Over time, if contango remained constant, the
      difference would continue to increase.





The
      chart
      below compares the price of the near month contract to the average price of
      the
      first 12 months over the last 10 years (1998-2007). When the price of the near
      month contract is higher than the average price of the front 12 month contracts,
      the market would be described as being in backwardation. When the price of
      the
      near month contract is lower than the average price of the front 12 month
      contracts, the market would be described as being in contango. Although the
      prices of the near month contract and the average price of the front 12 month
      contracts do tend to move up or down together, it can be seen that at times
      the
      near month prices are clearly higher than the average price of the 12 month
      contracts (backwardation), and other times they are below the average price
      of
      the front 12 month contracts (contango).


20











****PAST
      PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
      RESULTS***





An
      alternative way to view the same data is to subtract from the dollar price
      of
      the near month contract the average dollar price of the front 12 month
      contracts. If the resulting number is a positive number, then the near month
      price is higher than the average price of the front 12 months and the market
      could be described as being in backwardation. If the resulting number is a
      negative number, then the near month price is lower than the average price
      of
      the front 12 months and the market could be described as being in contango.
      The
      chart below shows the results from subtracting from the near month price the
      average price of the front 12 month contracts for the 10 year period between
      1998 and 2007.





21











****PAST
      PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
      RESULTS***





An
      investment in a portfolio that involved owning only the near month contract
      would likely produce a different result than an investment in a portfolio that
      owned an equal number of each of the front 12 months’ worth of contracts.
      Generally speaking, when the crude oil futures market is in backwardation,
      the
      near month only portfolio would tend to have a higher total return than the
      12
      month portfolio. Conversely, if the crude oil futures market was in contango,
      the portfolio containing 12 months’ worth of contracts would tend to outperform
      the near month only portfolio. The chart below shows the results of owning
      a
      portfolio consisting of the near month contract versus a portfolio containing
      the front 12 months’ worth of contracts. In this example, each month, the near
      month only portfolio would sell the near month contract at expiration and buy
      the next month out contract. The portfolio holding an equal number of the front
      12 months’ worth of contracts would sell the near month contract at expiration
      and replace it with the contract that becomes the new twelfth month
      contract.


22











****PAST
      PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
      RESULTS***





As
      seen
      in the chart, there have been periods of both positive and negative annual
      total
      returns for both portfolios over the last 10 years. In addition, there have
      been
      periods during which the near month only approach had higher returns, and
      periods where the 12 month approach had higher total returns. The above chart
      does not represent the performance history of USOF or any affiliated
      funds.





Historically,
      the oil futures markets have experienced periods of contango and
      backwardation, with backwardation being in place more often than contango.
      During the previous two years, including 2006 and the first half of 2007, these
      markets have experienced contango. However, starting early in the third quarter
      of 2007, the crude oil futures market moved into backwardation. The crude oil
      markets remained in backwardation until late in the second quarter of 2008
      when
      they moved into contango. The crude oil markets remained in contango until
      late
      in the third quarter of 2008, when the markets moved into backwardation.
      While 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, contango
      and backwardation have 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 made during the second
      quarter of 2007, a period of contango in the crude oil markets, decreased
      by -0.71%, while the spot price of crude oil for immediate delivery during
      the
      same period increased by 7.30%. Conversely, an investment made in USOF
      units during the third quarter of 2007, a period in which the crude oil futures
      market was mostly in backwardation, increased by 17.82% while the spot price
      of
      crude oil increased by 15.53% (note: these comparisons ignore the potential
      costs associated with physically owning and storing crude oil which could be
      substantial).





Periods
      of contango or backwardation do not meaningfully impact USOF’s investment
      objective of having percentage changes in its per unit NAV track percentage
      changes in the price of the Benchmark Oil Futures 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 Oil Futures 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.


23


*Crude
      Oil Market.* During
      the nine month period ended September 30, 2008, crude oil prices were impacted
      by several factors. On the consumption side, demand remained strong outside
      the
      United States as continued global economic growth, especially in emerging
      economies such as China and India, remained brisk. Additionally, the U.S.
      dollar, the currency in which crude oil is traded globally, continued to fall,
      effectively making crude oil cheaper for most non-U.S. dollar economies. Crude
      oil prices reached an all time high in July 2008 when the front month contract
      price reached approximately $145 a barrel.





However,
      concerns about a weakening U.S. economy leading to reduced demand for oil
      products became a major factor late in the third quarter of 2008. On the supply
      side, production remained steady despite concerns about violence impacting
      production in Iraq and Nigeria. Political tensions between Iran and the United
      States also contributed to market concerns about interruptions in production.
      At
      the same time, a concern remained about the ability of major oil producing
      countries to continue to raise their production to accommodate increasing
      demand. However, oil prices reversed their upward trend and fell sharply late
      in
      the third quarter of 2008 as a slowing U.S. economy, and flat demand growth
      outside of the U.S., was enough to improve the global supply and demand balance.
      The front month futures contract ended the third quarter of 2008 at
      approximately $100, down 31% from its July highs.




*Crude
        Oil Price Movements in Comparison to other Energy Commodities and Investment
        Categories.* The
        General Partner believes that investors frequently measure the degree to
        which
        prices or total returns of one investment or asset class move up or down
        in
        value in concert with another investment or asset class. Statistically, such
        a
        measure is usually done by measuring the correlation of the price movements
        of
        the two different investments or asset classes over some period of time.
        The
        correlation is scaled between 1 and -1, where 1 indicates that the two
        investment options move up or down in price or value together, known as
“positive correlation,” and -1 indicating that they move in completely opposite
        directions, known as “negative correlation.” A correlation of 0 would mean that
        the movements of the two are neither positively or negatively correlated,
        known
        as “non-correlation.” That is, the investment options sometimes move up and down
        together and other times move in opposite directions.
 
 For
        the
        ten year time period between 1997 and 2007, the chart below compares the
        monthly
        movements of crude oil versus the monthly movements of several other energy
        commodities, natural gas, heating oil, and gasoline, as well as several major
        non-commodity investment asset classes such as large cap U.S. equities, U.S.
        government bonds and global equities. It can be seen that over this particular
        time period, the movement of crude oil on a monthly basis was NOT strongly
        correlated, positively or negatively, with the movements of large cap U.S.
        equities, U.S. government bonds or global equities. However, movements in
        crude
        oil had a strong positive correlation to movements in heating oil and unleaded
        gasoline. Finally, crude oil had a positive, but weaker, correlation with
        natural gas.
 
 10
                  Year Correlation Matrix 1997-2007
              
              Large
                  Cap US Equities (S&P 500)
              
              U.S.
                  Govt. Bonds (EFFAS U.S. Government Bond Index)
              
              Global
                  Equities (FTSE World Index)
              
              Unleaded
                  Gasoline
              
              Natural
                  Gas
              
              Heating
                  Oil
              
              **Crude
                  Oil**Large
                  Cap U.S. Equities (S&P 500)
              
              
              1
              
              
              -0.237
              
              
              0.949
              
              
              -0.087
              
              
              -0.008
              
              
              -0.065
              
              
              **-0.037**US
                  Govt. Bonds (EFFAS U.S. Government Bond Index)
              
              
              
              
              
              1
              
              
              -0.259
              
              
              -0.175
              
              
              0.197
              
              
              0.065
              
              
              **0.033**Global
                  Equities (FTSE World Index)
              
              
              
              
              
              
              
              
              1
              
              
              0.124
              
              
              0.029
              
              
              -0.003
              
              
              **0.040**Gasoline
              
              
              
              
              
              
              
              
              
              
              
              1
              
              
              0.267
              
              
              0.663
              
              
              **0.634**Natural
                  Gas
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1
              
              
              0.480
              
              
              **0.344**Heating
                  Oil
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1
              
              
              **0.802**Crude
                  Oil
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              **1**source:
                  Bloomberg, NYMEX
 
 ***PAST
        PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
        RESULTS***
 
 Investors
        are cautioned that the historical price relationships between crude oil and
        various other energy commodities, as well as other investment asset classes,
        as
        measured by correlation may not be reliable predictors of future price movements
        and correlation results. The results pictured above would have been different
        if
        a different range of dates had been selected. The General Partner believes
        that
        crude oil has historically not demonstrated a strong correlation with equities
        or bonds over long periods of time. However, the General Partner also believes
        that in the future it is possible that crude oil could have long term
        correlation results that indicate prices of crude oil more closely track
        the
        movements of equities or bonds. In addition, the General Partner believes
        that,
        when measured over time periods shorter than ten years, there will always
        be
        some periods where the correlation of crude oil to equities and bonds will
        be
        either more strongly positively correlated or more strongly negatively
        correlated than the long term historical results suggest.
  24
 
 The
        chart
        below covers a more recent, but much shorter, range of dates than the above
        chart. Over the nine months ended September 30, 2008, crude oil continued
        to
        have a strong positive correlation with heating oil and gasoline. During
        this
        period it also had a stronger correlation with the movements of natural gas
        than
        it had displayed over the prior ten year period. Notably, the correlation
        between crude oil and both large cap U.S. equities and global equities, which
        had been essentially non-correlated over the prior ten years, displayed results
        that indicated that they had a weak but positive correlation over this shorter
        time period, particularly due to the recent downturn in the U.S. economy.
        Finally, the results showed that crude oil and U.S. government bonds, which
        had
        essentially been non-correlated for the prior ten year period, were weakly
        negatively correlated over this more recent time period.
 
 Correlation
                  Matrix 2008 YTD (9 months)
              
              Large
                  Cap US Equities (S&P 500)
              
              U.S.
                  Govt. Bonds (EFFAS U.S. Government Bond Index)
              
              Global
                  Equities (FTSE World Index)
              
              Unleaded
                  Gasoline
              
              Natural
                  Gas
              
              Heating
                  Oil
              
              **Crude
                  Oil**Large
                  Cap U.S. Equities (S&P 500)
              
              
              1
              
              
              -0.641
              
              
              0.920
              
              
              0.565
              
              
              -0.152
              
              
              0.214
              
              
              **0.289**US
                  Govt. Bonds (EFFAS U.S. Government Bond Index)
              
              
              
              
              
              1
              
              
              -0.682
              
              
              -0.581
              
              
              -0.045
              
              
              -0.414
              
              
              **-0.507**Global
                  Equities (FTSE World Index)
              
              
              
              
              
              
              
              
              1
              
              
              0.760
              
              
              0.108
              
              
              0.496
              
              
              **0.575**Gasoline
              
              
              
              
              
              
              
              
              
              
              
              1
              
              
              0.650
              
              
              0.900
              
              
              **0.923**Natural
                  Gas
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1
              
              
              0.805
              
              
              **0.771**Heating
                  Oil
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1
              
              
              **0.914**Crude
                  Oil
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              **1**source:
                  Bloomberg, NYMEX
  ***PAST
        PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
        RESULTS***


**Critical
      Accounting Policies**





Preparation
      of the condensed 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 condensed 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.  The values which are used by USOF for its forward
      contracts are provided by its commodity broker who uses market prices when
      available, while over-the-counter contracts are 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. In addition, USOF estimates interest income
      on
      a daily basis using prevailing interest rates earned on its cash and cash
      equivalents. These estimates are adjusted to the actual amount received on
      a monthly basis and the difference, if any, is not considered
      material.





**Liquidity
      and Capital Resources**





USOF
      has
      not made, and 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 the Treasuries, cash
      and/or cash equivalents 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 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 Treasuries, cash and/or cash equivalents. USOF has
      allocated substantially all of its net assets to trading in Oil Interests.
      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. A significant portion of the NAV is held in cash and cash
      equivalents that are used as margin and as collateral for USOF’s trading in
      Oil Interests. The percentage that Treasuries will bear to the total net
      assets will 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.


25


USOF’s
      investment in Oil Interests may be subject to periods of illiquidity because
      of
      market conditions, regulatory considerations and other reasons. For example,
      most 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 nor
      liquidated unless the traders are willing to effect trades at or within the
      specified daily limit. Such market conditions could prevent USOF from promptly
      liquidating its positions in Oil Futures Contracts. During the nine month period
      ended September 30, 2008, USOF was not forced to purchase or liquidate any
      of
      its positions while daily limits were in effect; however, USOF cannot predict
      whether such an event may occur in the future.




Prior
      to
      March 23, 2007, all payments with respect to USOF’s and the General
      Partner’s expenses were paid by their affiliates. Neither USOF nor the
      General Partner has any obligation or intention to refund such payments by
      their
      affiliates. These affiliates are under no obligation to pay USOF’s or the
      General Partner’s current or future expenses. If 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 contracts 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 had in utilizing its model to trade in Oil Interests in a manner
      intended to track the changes in the spot price of crude 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 NYMEX and on most
      other foreign futures 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. There can be no assurance that any
      counterparty, clearinghouse, or their members or their financial backers will
      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 generally 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 futures commission merchants are not allowed
      to
      commingle USOF’s assets with its 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.


26


As
      of
      September 30, 2008, USOF had deposits in domestic and foreign financial
      institutions, including cash investments in money market funds, in the amount
      of
      $1,701,783,696. This amount is subject to loss should these institutions cease
      operations.





**Off
      Balance Sheet Financing**





As
      of
      September 30, 2008, 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 which 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.





**Redemption
      Basket Obligation**





In
      order
      to meet its investment objective and pay its contractual obligations described
      below, USOF requires liquidity to redeem units, which redemptions must be
      in blocks of 100,000 units called “Redemption Baskets”. USOF has to date
      satisfied this obligation by paying from the cash or cash equivalents it holds
      or through the sale of its Treasuries 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 0.50% for a NAV of $1 billion or less,
      and thereafter 0.20% for a NAV above $1 billion.





The
      General Partner agreed to pay the start-up costs associated with the
      formation of USOF, primarily its legal, accounting and other costs in connection
      with the General Partner’s registration with the CFTC as a CPO and the
      registration and listing of USOF and its units with the SEC, FINRA and the
      AMEX, respectively. However, offering costs incurred in connection with
      registering and listing additional units of USOF are directly borne on an
      ongoing basis by USOF, and not by the General Partner.




The
      General Partner pays the fees of USOF’s marketing agent, ALPS Distributors,
      Inc., and the fees of the custodian and transfer agent, Brown Brothers Harriman
      & Co. (“BBH&Co.”), as well as BBH&Co.’s fees for performing
      administrative services, including in connection with the preparation of USOF’s
      condensed financial statements and its SEC and CFTC reports. The General Partner
      and USOF have also entered into a licensing agreement with the NYMEX
      pursuant to which USOF and the affiliated funds managed by the General Partner
      pay a licensing fee to the NYMEX. The General Partner also pays any fees
      for implementation of services and base service fees charged by the accounting
      firm responsible for preparing USOF’s tax reporting forms; however, USOF pays
      the fees and expenses associated with its tax accounting and reporting
      requirements.




In
      addition to the General Partner’s management fee, USOF pays its brokerage fees
      (including fees to a futures commission merchant), over-the-counter dealer
      spreads, any licensing fees for the use of intellectual property, and,
      subsequent to the initial offering, registration and other fees paid to the
      SEC,
      FINRA, or other regulatory agencies in connection with the offer and sale of
      units, as well as legal, printing, accounting and other expenses associated
      therewith, and extraordinary expenses. The latter are expenses not incurred
      in the ordinary course of USOF’s business, including expenses relating to
      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 a futures commission merchant are on a contract-by-contract, or
      round turn, basis. USOF also pays a portion of the fees and expenses of the
      independent directors of the General Partner. See Note 3 to the Notes to
      Condensed Financial Statements (Unaudited).




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. Either party may terminate these agreements earlier for certain
      reasons described in the agreements.


27


**Item 3.**  **Quantitative
      and Qualitative Disclosures 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 an over-the-counter contract bears the credit risk
      that the other party may not be able to perform its obligations under its
      contract.




Some
      crude oil-based derivatives transactions contain fairly generic terms and
      conditions and are available from a wide range of participants. Other crude
      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 crude 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 spot price of crude oil, 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 spot price of light, sweet crude oil, the price of Oil Futures
      Contracts traded on the NYMEX 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 such 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. In addition, it is also possible for USOF and its counterparty
      to
      agree to clear their agreement through an established futures clearing house
      such as those connected to the NYMEX or the ICE Futures. In that event, USOF
      would no longer have credit risk of its original counterparty, as the
      clearinghouse would now be USOF’s counterparty. USOF would still retain any
      price risk associated with its transaction.




The
      creditworthiness of each potential counterparty is assessed by the General
      Partner. The General Partner assesses or reviews, as appropriate, the
      creditworthiness of each potential or existing counterparty to an
      over-the-counter contract pursuant to guidelines approved by the General
      Partner’s board of directors. Furthermore, the General Partner on behalf of USOF
      only enters into over-the-counter contracts with (a) members of the Federal
      Reserve System or foreign banks with branches regulated by the Federal Reserve
      Board; (b) primary dealers in U.S. government securities; (c) broker-dealers;
      (d) commodity futures merchants; or (e) affiliates of the foregoing. Existing
      counterparties are also reviewed periodically by the General
      Partner.





USOF
      anticipates that the use of Other Oil Interests together with its investments
      in
      Oil Futures Contracts will produce price and total return results that closely
      track the investment goals of USOF.





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 if the General Partner felt
      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.


28


During
      the nine month period ended September 30, 2008, USOF did not employ any hedging
      methods such as those described above since all of its investments were made
      over an exchange. Therefore, USOF was not exposed to counterparty
      risk.





**Item 4.****Controls
      and Procedures.**




**Disclosure
      Controls and Procedures**





USOF
      maintains disclosure controls and procedures that are designed to ensure that
      material information required to be disclosed in USOF’s periodic reports filed
      or submitted under the Securities Exchange Act of 1934, as amended, is recorded,
      processed, summarized and reported within the time period specified in the
      SEC’s
      rules and forms.




The
      duly
      appointed officers of the General Partner, including its chief executive officer
      and chief financial officer, who perform functions equivalent to those
      of a principal executive officer and principal financial officer of USOF if
      USOF had any officers, have evaluated the effectiveness of USOF’s
      disclosure controls and 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 quarterly report.





**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.


29


**Part
      II.**  **OTHER
      INFORMATION**




**Item
      1. Legal Proceedings.**





Not
      applicable.





**Item
      1A. Risk Factors.**





There
      has
      not been a material change from the risk factors previously disclosed in USOF's
      Annual Report on Form 10-K for the fiscal year ended December 31,
      2007.





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.**





Not
      applicable.





**Item
      3. Defaults Upon Senior Securities.**





Not
      applicable.





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





Not
      applicable.





**Item 5.**  **Other
      Information.**





**Monthly
      Account Statements**





Pursuant
      to the requirement under part 4.22 of the Commodity Exchange Act, each month
      USOF publishes an account statement for its unitholders, which includes a
      Statement of Income (Loss) and a Statement of Changes in NAV. The account
      statement is filed with the SEC on a current report on Form 8-K pursuant to
      Section 13 or 15(d) of the Exchange Act and posted each month on USOF’s
      website at www.unitedstatesoilfund.com.





**Item 6.**  **Exhibits.**




Listed
      below are the exhibits which are filed or furnished as part of this quarterly
      report on Form 10-Q (according to the number assigned to them in Item 601
      of Regulation S-K):





**Exhibit****Number**
            
            **Description
                of Document****10.1***
            
            Fifth
                Amended and Restated Agreement of Limited Partnership.**31.1****
            
            Certification
                by Principal Executive Officer Pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.**31.2****
            
            Certification
                by Principal Financial Officer Pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.**32.1*****
            
            Certification
                by Principal Executive Officer Pursuant to 18 U.S.C. Section 1350,
                as
                Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.**32.2*****
            
            Certification
                by Principal Financial Officer Pursuant to 18 U.S.C. Section 1350,
                as
                Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.





*Incorporated
      by reference to Registrant’s Current Report on Form 8-K filed on October 14,
      2008


**Filed
      herewith


***Furnished
      herewith


30


**SIGNATURES**




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.





**United States Oil Fund, LP (Registrant)**By:
            United States Commodity Funds LLC, its general partner(formerly known as Victoria Bay Asset Management, LLC)By:
            /s/
                  Nicholas D. GerberNicholas
                D. GerberChief
                Executive OfficerDate:  November
                10, 2008By:
            /s/
                  Howard MahHoward
                MahChief
                Financial OfficerDate:  November
                10, 2008


31