USO ETF: Can It Reach the $140 Level?

Key Takeaways

• Price Target: The $140 level represents a critical psychological round-number target for the USO ETF, sitting roughly 17% above recent trading levels and below the 52-week high of $154.08 reached in May 2026.
• Bullish Catalyst: Ongoing geopolitical tension surrounding the Strait of Hormuz continues to constrain roughly 20% of global oil supply, providing a structural underpinning for elevated crude prices and by extension USO.
• Futures Curve Advantage: The current backwardation in WTI futures contracts generates positive roll yield for USO, mechanically adding to net asset value each month before spot prices even move.
• Primary Obstacle: Any meaningful diplomatic breakthrough that reopens the Strait of Hormuz could unwind the geopolitical risk premium rapidly, potentially sending crude — and USO — sharply lower within days.
• Technical Context: Support has emerged near the $104–$110 zone during recent pullbacks, while $130 and the prior high near $154 serve as overhead reference points on any rally toward $140.
• Investor Takeaway: Reaching $140 is plausible under sustained supply-disruption conditions, but the path depends almost entirely on geopolitical developments and the trajectory of the WTI futures curve.

Why the $140 Level Stands Out

The United States Oil Fund (USO) has delivered one of the most dramatic commodity ETF performances in recent memory, surging from approximately $66 at its December 2025 low to an intra-year peak of $154.08 in May 2026 — a gain exceeding 130% at its zenith. After pulling back into the $118–$125 range by mid-July, the question on many traders' minds is whether USO can mount another leg higher and reclaim the $140 threshold. That level represents not only a round-number psychological marker but also a zone that, if breached, would put the 52-week high squarely back in play.

What USO Actually Holds

USO is a commodity-focused exchange-traded fund (ETF) that seeks to track the daily percentage movements of West Texas Intermediate (WTI) light, sweet crude oil futures. Unlike equity energy ETFs such as the Energy Select Sector SPDR Fund (XLE), USO does not own shares of oil producers, refiners, or pipeline companies. Instead, it holds near-month WTI futures contracts and rolls them forward each month as they approach expiration. With approximately $1.88 billion in net assets and an expense ratio of 0.86%, USO functions as a pure-play instrument for investors seeking direct exposure to crude oil price movements without trading futures accounts.

The Geopolitical Driver Behind the Move

The 2026 surge in USO has been driven almost entirely by the de facto closure of the Strait of Hormuz beginning in late February. Before the disruption, roughly 20% of global oil supply transited through this narrow waterway. The supply shock pushed WTI crude sharply higher, and USO — holding front-month futures — tracked the move with remarkable precision. The fund reported net income of $983.7 million in the first quarter of 2026, compared to just $40.3 million a year earlier, underscoring the magnitude of the price dislocation.

The U.S. Energy Information Administration's (EIA) May Short-Term Energy Outlook projected global inventory draws of 8.5 million barrels per day during the second quarter, supporting Brent crude near $106 through June before an anticipated decline toward $89 by the fourth quarter as Middle East flows potentially resume. As long as Hormuz transit volumes remain at a fraction of pre-crisis levels — Kpler data showed crossings at roughly 10% of normal in mid-April — the supply-demand imbalance provides a powerful tailwind for USO returning toward $140. I also checked this using Tickeron’s AI Screener to see how the ETF compares to others in the industry.

Roll Yield: A Structural Edge

Beyond the headline price of crude, USO currently benefits from a structural feature of the futures market known as backwardation. When near-month contracts trade at a premium to deferred months — as they have throughout much of 2026 — USO sells expiring contracts at higher prices and buys the next month at a discount. This "roll yield" adds to net asset value before spot crude moves a single dollar. During the first quarter, this mechanism helped USO's NAV outperform its benchmark by more than six percentage points.

However, this tailwind is entirely reversible. If the Strait of Hormuz reopens and the futures curve flattens or shifts into contango — where front-month contracts trade at a discount to later months — USO would incur a monthly cost to roll its positions, bleeding NAV even if spot crude prices remain stable. The spread between front-month and six-month WTI contracts, published daily by the CME, serves as the critical indicator to monitor.

Risks That Could Block the $140 Target

The single largest risk to the $140 target is a diplomatic resolution that restores Hormuz transit. On April 8, 2026, when political signals briefly suggested a conditional pause in military operations, crude prices plunged 13% to 17% in a single session — a vivid demonstration of how rapidly the geopolitical risk premium can evaporate. Some analysts have estimated that full Hormuz normalization could push WTI back toward $75 per barrel within weeks, which would likely drag USO substantially below current levels.

Additional headwinds include the potential for demand destruction at elevated price levels, coordinated releases from strategic petroleum reserves among consuming nations, and the risk that the futures curve flips into contango before spot prices stabilize. The EIA's forecast of Brent declining to $79 by 2027 assumes a gradual resumption of Middle East flows, and any acceleration of that timeline would compress the window for USO to mount a recovery rally.

Technical Levels to Watch

From a technical perspective, USO has established a support zone between roughly $104 and $110 during recent pullbacks in late June and early July. This area corresponds to levels where buyers previously stepped in, and it sits above the psychologically important $100 round number. On the upside, $130 served as resistance in mid-June and represents the first major hurdle on the way to $140. Above that, the May peak of $154.08 looms as the ultimate test. For USO to reach $140 sustainably, it would need to clear $130 with conviction — ideally on elevated volume confirming institutional participation.

Fund Flows and Sentiment

Despite the pullback from May highs, investor interest in USO has remained elevated. The fund recorded net inflows of approximately $531 million over the month ending mid-July, representing a 26% increase in assets. Daily trading volumes have averaged well above historical norms, reflecting both conviction positions and tactical trading around geopolitical headlines. The elevated put/call ratio of approximately 1.0 on a 30-day basis suggests a balanced but cautious options market, with significant hedging activity alongside directional bets.

Final Assessment

The question of whether USO can reach $140 is ultimately a question about the Strait of Hormuz. Under a scenario where transit volumes remain severely constrained and the backwardated futures curve persists, the structural and mechanical forces supporting USO make a move toward $140 entirely realistic — particularly given the ETF's demonstrated ability to rally more than 100% in a matter of months earlier this year. The roll-yield advantage, sustained supply deficits, and elevated fund inflows all align in favor of further upside.

However, the risks are equally substantial and unusually binary. A single diplomatic headline could erase weeks of gains in hours, as the April 8 price action demonstrated. The futures curve could flip from tailwind to headwind without warning. Investors monitoring USO should focus on two primary indicators: weekly tanker-tracking data showing Hormuz transit volumes, and the WTI futures strip for evidence of curve flattening. Until either signal decisively turns negative, the path toward $140 remains open — but it is a path paved with geopolitical uncertainty that demands constant vigilance. I’m watching this closely with the help of AI-driven signals to stay on top of any shifts.

AI Daily Buy/Sell Signals for Smarter Trading

Navigating a volatile commodity ETF like USO requires timely and data-driven decision-making. In my experience, Tickeron's AI Daily Buy/Sell Signals provide a practical edge by monitoring thousands of instruments and delivering actionable Buy, Sell, or Hold signals based on technical patterns and market conditions. This helps streamline analysis without replacing personal judgment, allowing traders to respond efficiently to developments in fast-moving names like USO.

Disclaimer

The information on this webpage is provided for general informational and educational purposes only and is not intended as investment advice, a recommendation to purchase or sell any security, or an offer or solicitation related to investments. It does not consider your personal financial situation, goals, or risk profile, and all investing carries inherent risks, including the possibility of losing your entire investment. For more details, please review our full disclaimer.

Disclaimers and Limitations

Contributor

Sergey Savastiouk|Expert

Sergey Savastiouk, Ph.D. has a degree in Applied Mathematics from Moscow University and has extensive experience as an entrepreneur, investor, manager, and mathematician. His professional expertise is in applied mathematics, mathematical modeling, system and pattern analysis, and software and hardware system integration. He has served as the CEO of several hi-tech start-up companies and nonprofit organizations, which has given him proven capabilities in business strategy for high-tech start-up companies, market assessment, company formation, team building, product development, marketing, and sales. He has published numerous articles in journals and magazines on related fields. As a retail investor, he spent 15 years developing his proprietary trading and quantitative algorithms (now Tickeron’s A.I.), which brought him significant returns in trading the stock market. His current work and goal in founding Tickeron is to bring professional, sophisticated stock market analysis capabilities to retail investors via an easy-to-use interface.

Industry description