USO vs BNO comes down to which crude you want and what the curve is paying. Oil slid again on September 22, 2026 — WTI to $89.42 and Brent to $97.64, per TheStreet’s close — yet USO is up 114.23% year to date against USL’s 69.58%, per ETF Database. That 45-point gap is roll yield, not skill. Fees are 0.60%, 1.00% and 0.85%.
Three US-listed funds give you crude futures exposure without a margin account. They charge different fees, track different benchmarks, and sit in different parts of the curve — and that last difference has been worth more than every fee decision combined.
What happened to oil on September 22, 2026?
Crude sold off hard as the war risk premium started to drain. WTI fell 3.19% to $89.42 and Brent fell 2.69% to $97.64 on Tuesday, September 22, 2026, according to TheStreet’s market close report. USO closed at $144.08, down 2.75%, per StockAnalysis.
The trigger was diplomacy. Reuters reported on September 21 that President Trump signaled openness to meeting Iranian President Pezeshkian at the UN General Assembly, pushing oil to an 11-day low.
Supply is also healing: Saudi crude shipments through the Strait of Hormuz averaged 2.9 million barrels per day over six days, against roughly 700,000 b/d in August, Reuters reported.
“It seems that a degree of risk premium is being removed from oil prices on hopes that a diplomatic path to de-escalate the US-Iran war may arrive this week,” said Tim Waterer, chief market analyst at KCM Trade.
USO vs BNO vs USL: which oil ETF is cheapest to hold?
USO is the cheapest at 0.60%, USL sits in the middle at 0.85%, and BNO is the most expensive at 1.00%, per ETF Database and StockAnalysis. USO is also by far the most liquid, with $2.04 billion in assets against BNO’s $748 million and USL’s $46 million.
| Fund | Benchmark | Expense ratio | AUM | Avg. daily volume (3-mo) | Inception |
|---|---|---|---|---|---|
| USO | Front-month NYMEX WTI | 0.60% | $2.04B (Sep 22, 2026) | 5,811,298 shares | Apr 10, 2006 |
| BNO | Front-month ICE Brent | 1.00% | $748.31M (Sep 22, 2026) | 1,800,339 shares | Jun 2, 2010 |
| USL | 12 consecutive WTI months | 0.85% | $45.66M (Sep 10, 2026) | 14,042 shares | Dec 6, 2007 |
What the fee gap costs on a $10,000 position
Run $10,000 through each expense ratio for one year and the arithmetic is small:
- USO at 0.60%: $10,000 × 0.0060 = $60
- USL at 0.85%: $10,000 × 0.0085 = $85
- BNO at 1.00%: $10,000 × 0.0100 = $100
The widest spread, USO to BNO, is $40 a year. Hold for five years and you are arguing over roughly $200 before compounding.
Now compare that to the performance gap. USO returned 114.23% year to date through September 21, 2026; BNO returned 107.87% over the same window, per ETF Database. That 6.36-point spread is sixteen times the annual fee difference.
Fees are the smallest decision you make in this category. Say that out loud before you optimize for basis points.
Why did USL trail USO by 45 points this year?
Because USL deliberately avoids the part of the curve that has been paying. USO returned 114.23% year to date through September 21, while USL returned 69.58% through September 14, per ETF Database — a gap of roughly 45 points on the same commodity, from the same issuer.
The as-of dates differ by a week, so treat 45 points as the approximate size of the gap, not a precise figure.
How backwardation turns into roll yield
A futures fund never holds a barrel. It holds a contract, and before that contract expires it sells and buys a later one. When later months trade below the front month — backwardation — each roll buys more exposure for the same money.
Here is the live curve. Reuters reported the October WTI contract at $98.34 on September 21, 2026, with November WTI at $94.16. That is a $4.18 discount one month out.
Work the arithmetic. A fund rolling from October into November pays $94.16 for barrels priced at $98.34. If spot holds and November converges to $98.34, the gain is $4.18 ÷ $94.16 = 4.44% in a month, with no move in the oil price at all.
Twelve rolls at 4.44% compound to about 68% (1.044412 = 1.68), before the 0.60% fee. That is the machinery behind USO’s year.
USO takes that roll at full strength. Its prospectus describes moving the entire book from the near-month contract into the next month over a five-day period each month.
USL spreads across twelve consecutive WTI months. It replaces roughly one-twelfth of its exposure each month and never owns the steep front of the curve outright. That is the design, and this year it cost about 45 points.
CME Group documented the same mechanism on April 16, 2026: an investor holding the April 2026 contract gained 35.6%, rolled into May and gained another 13.1%, compounding to 53.4% against a spot move of 48% — a 5.4-point edge CME attributed directly to positive roll yield.
What happens when the curve flips back
The same mechanism runs in reverse. In contango, later months cost more, and every roll buys fewer barrels. USO’s own category reputation was built in those years — ETF Database still flags that the fund “often suffers from severe contango.”
This is the skeptical point worth holding onto. Roll yield is not free money. It is the market paying you to hold barrels nobody wants to store, and it disappears the moment supply fear does.
September 22 was a preview: risk premium leaving the front month is exactly how a backwardated curve flattens. If it flips, USL’s structure becomes the defensive one and USO’s becomes the leak. Our XLE vs XOP comparison covers the equity route that sidesteps roll mechanics entirely.
Is USO or BNO the better read on the Iran risk premium?
BNO tracks Brent, the waterborne benchmark most exposed to Strait of Hormuz disruption; USO tracks WTI at Cushing, Oklahoma, an inland US grade. If your thesis is a Middle East supply shock, BNO is the more direct instrument — you just pay 1.00% for it.
The September 22 tape showed the difference. Brent held $97.64 while WTI sat at $89.42, per TheStreet — a spread of roughly $8 between the two benchmarks.
Yet BNO trailed USO by 6.36 points year to date. Only 0.40 points of that is the fee difference. The rest is benchmark and curve behavior, which is the honest answer to “which one wins”: nobody can price that in advance.
What you can price is liquidity. USO trades 5.81 million shares a day against BNO’s 1.80 million and USL’s 14,042, per ETF Database. USL’s volume is thin enough that an institutional-size order becomes its own problem.
What do these oil ETFs cost at tax time?
More than the expense ratio, and the bill arrives whether or not you sell. USCF confirms USO, USL and BNO are treated as partnerships that issue Schedule K-1s, with futures positions marked to market annually.
Three consequences follow, and in a year like this one they are large.
- Phantom gains. Open futures positions are marked to market at year end. USCF states that shareholders report their share of gains “regardless of whether distributions are made.” After a 114% year, that is a tax bill on paper profits you have not cashed.
- 60/40 treatment. USCF states gains and losses are reportable as 60% long-term and 40% short-term, regardless of holding period. That is favorable for short holds and less favorable than a one-year stock position.
- K-1 timing. Partnership forms typically arrive later than a 1099.
USCF lists SDCI, UDI, UMI, USE, USG, WTIB, ZSB and ZSC as registered ETFs that do not issue K-1s — worth checking if the paperwork is the blocker rather than the exposure.
Tax drag is the cost most oil-ETF comparisons skip, and the one most likely to exceed 0.40 points. For the bond-side version of this debate, see TLT vs SGOV.
Which oil ETF fits which investor?
Match the fund to the horizon, not to the fee. USO wins on cost and liquidity for short, directional trades. BNO is the cleaner Brent proxy for geopolitical supply theses. USL is the structural hedge against the curve flipping — at the price of a thin market.
| If you want… | Fund on measurable attributes | Why | What it costs you |
|---|---|---|---|
| Cheapest, most liquid WTI exposure | USO | 0.60% fee, $2.04B AUM, 5.81M shares/day | Full exposure to a curve flip |
| A direct Brent / Hormuz proxy | BNO | Tracks the waterborne global benchmark | 1.00% fee, 40bp above USO |
| Reduced roll sensitivity | USL | Spreads across 12 WTI months | 0.85% fee, 14,042 shares/day, gave up ~45 pts YTD |
| No K-1 paperwork | None of the three | All are partnerships issuing K-1s | Look outside the USCF commodity pools |
| Oil beta without futures mechanics | Equity energy ETFs | No roll, no K-1, 1099 reporting | Company risk replaces curve risk |
Frequently asked questions about USO vs BNO
Does USO actually hold physical oil?
No. USO’s prospectus describes a benchmark of NYMEX light sweet crude futures for delivery to Cushing, Oklahoma, rolled from the near-month contract into the next month over a five-day period each month. No barrels are ever taken.
Which is cheaper, USO or BNO?
USO, clearly. Its 0.60% expense ratio is 40 basis points below BNO’s 1.00%, per ETF Database and StockAnalysis — $60 versus $100 a year on a $10,000 position.
Why is USL so far behind USO in 2026?
USL spreads its exposure across twelve WTI contract months instead of concentrating in the front. In a backwardated curve that structure gives up most of the roll gain — roughly 45 points year to date, per ETF Database figures through mid-September 2026.
What is roll yield in one sentence?
It is the gain or loss a futures fund books purely from replacing an expiring contract with a later one — positive when later months are cheaper (backwardation), negative when they are more expensive (contango).
Do these oil ETFs send a 1099 or a K-1?
A K-1. USCF confirms USO, USL and BNO are treated as partnerships for US income tax purposes, with futures positions marked to market and gains reported 60% long-term, 40% short-term.
Can you owe tax on an oil ETF you never sold?
Yes. USCF states that open futures positions are marked to market at year end and that shareholders report their share of gains regardless of whether distributions are made.
Does the September 2026 oil slide change the comparison?
It changes the risk, not the ranking. Falling front-month prices on diplomacy headlines — WTI $89.42 on September 22, 2026, per TheStreet — are how a backwardated curve flattens, which is precisely when USO’s structural advantage narrows.
The bottom line on USO vs BNO vs USL
On measurable attributes, USO wins: lowest fee at 0.60%, largest asset base at $2.04 billion, deepest volume at 5.81 million shares a day, and the structure most exposed to a curve that has been paying 4.44% a month to roll.
That last item is the catch: USO’s 2026 lead is a bet on backwardation persisting, not on management.
So the answer depends on exactly one variable: the shape of the WTI curve. Steep backwardation favors USO. A flip to contango favors USL’s twelve-month ladder. A Hormuz-driven supply thesis favors BNO’s Brent benchmark, at 40 basis points more.
And all three hand you a K-1 with marked-to-market gains, which after a 114% year is the cost most holders have not priced yet. See also our look at gold ETF fees for a commodity wrapper without futures roll, and TIPS vs Treasuries for the inflation side of an oil shock.
This article is journalism, not investment advice. Do your own research before investing.
Sources
- TheStreet — Stock Market Today, September 22, 2026
- Reuters via Yahoo Finance — Oil prices fall to 11-day low, September 21, 2026
- CME Group — Implications of WTI Oil Futures in Backwardation, April 16, 2026
- USCF Investments — K-1 Information
- USCF Investments — USO fund page and benchmark methodology
- ETF Database — USO profile
- ETF Database — BNO profile
- ETF Database — USL profile
- StockAnalysis — USO
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