The operator behind the popular United States Oil Fund LP (USO) has agreed to pay $2.5 million to settle charges from the SEC and the Commodity Futures Trading Commission after halting creations during last April’s oil price meltdown.
Oil prices were depressed through the spring of last year, as the pandemic broadly curbed travel, and a price war between Saudi Arabia and Russia flooded the market with cheap oil.
Those factors put oil traders in a bind in late April as their front-month contracts approached expiry, and eventually they began paying other traders to take on those barrels for delivery. In effect, the price of oil was negative for the first time in history.
At one point on April 20, the price of oil reached -$37 per barrel.
At that time, USO’s sole broker refused to execute any new positions for the ETF, forcing it to refuse to take on new creation orders. The ETF’s managers made several changes to its portfolio in late April and early May to include contracts across the futures curve.
Those moves prompted the SEC to begin an investigation last August into whether investors were properly made aware of the changes to the fund’s prospectus before they went into effect.
USO’s issuer United States Commodity Holdings agreed to the fine without admitting or denying the SEC’s findings. The firm declined to comment.