United States Brent Oil Fund, LP (BNO) 10-K Filing Review for Fiscal Year 2023

Introduction

The United States Brent Oil Fund, LP (BNO) is a commodity pool that issues shares traded on the NYSE Arca. Its primary investment objective is to reflect the performance of the spot price of Brent crude oil, less expenses. This review will delve into the key aspects of BNO's 10-K filing for the fiscal year ended December 31, 2023, focusing on its financial performance, investment strategy, market risks, and operational highlights.

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Financial Performance Overview

For the fiscal year 2023, BNO reported a decrease in net asset value (NAV) per share from $28.26 to $27.39, marking a (3.08)% decline. This decrease was primarily attributed to lower Brent crude oil prices and the related decrease in the value of the Crude Oil Futures Contracts in which BNO held and traded. Despite this, BNO managed to generate $8,584,086 in dividend and interest income, showcasing a robust annualized yield of 4.57% based on average daily total net assets.

Investment Strategy and Market Exposure

BNO's investment strategy involves primarily investing in futures contracts for crude oil and other petroleum-based fuels traded on major exchanges. The fund seeks to achieve its investment objective by ensuring that the average daily percentage change in its NAV closely tracks the daily percentage changes in the price of the Benchmark Futures Contract. During 2023, BNO held 1,689 Futures Contracts for Brent crude oil traded on the ICE Futures Europe.

Market Risks and Challenges

BNO's performance is directly influenced by the volatile nature of the crude oil market. The fund is exposed to market risks such as commodity price risk, credit risk, and the risk of non-performance by counterparties to Over-The-Counter (OTC) contracts. The filing highlights the challenges posed by the term structure of crude oil prices, specifically the conditions of contango and backwardation, which can significantly impact the fund's total return. Additionally, geopolitical events, including the Russia-Ukraine war and the COVID-19 pandemic, have introduced heightened levels of uncertainty and volatility in the crude oil markets.

Operational Highlights and Governance

BNO is managed by the United States Commodity Funds LLC (USCF), which is responsible for the fund's overall management and investment strategy. The fund pays USCF a management fee calculated as a percentage of BNO's average daily total net assets. BNO also incurs expenses related to brokerage fees, licensing fees, and other operational costs. The fund's governance structure includes provisions for the appointment of a successor general partner in case of unforeseen circumstances, ensuring operational continuity.

Conclusion

The fiscal year 2023 presented several challenges for BNO, primarily due to the fluctuating crude oil market and geopolitical tensions. Despite these challenges, BNO's strategic investment approach and the management team's efforts to mitigate risks have enabled the fund to navigate through a turbulent market environment. Investors in BNO should remain cognizant of the inherent risks associated with commodity investments and the potential impact of global events on the crude oil market. As BNO continues to adapt its strategy in response to market conditions, it remains a notable option for investors seeking exposure to the performance of Brent crude oil.