 | 1275 Pennsylvania Ave., NW Washington, DC 20004-2415 202.383.0100 Fax 202.637.3593 www.sutherland.com | ATLANTA AUSTIN HOUSTON NEW YORK WASHINGTON DC |
JAMES M. CAIN
DIRECT LINE: 202.383.0180
E-mail: james.cain@sutherland.com
April 28, 2011
via edgar submission
Sonia Barros
Special Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
| Re: | United States Short Oil Fund, LP Post-Effective Amendment No. 2 to Registration Statement on Form S-1 Filed on April 5, 2011 (File No. 333-152386) |
Dear Ms. Barros:
Thank you for your prompt review of Post-Effective Amendment No. 2 to the Registration Statement on Form S-1 (the “Registration Statement”) filed by United States Short Oil Fund, LP (“USSO”) on April 5, 2011. We are in receipt of your oral comment asking for additional disclosure in the Summary section relating to the effects of contango and backwardation on the ability of USSO to meet its investment objective. In response to your comment, we will include the following language on page 3 in the Summary Section of the Registration Statement in the final prospectus filed under Rule 424 of the Securities Act of 1933, as amended (the “Securities Act”), that will constitute the prospectus of USSO distributed in accordance with the requirements of the Securities Act:
As an example, for the year ended December 31, 2010, the actual total return of USSO as measured by changes in its per unit NAV was -8.12%. This is based on an initial per unit NAV of $43.99 on December 31, 2009 and an ending per unit NAV as of December 31, 2010 of $40.42. During this time period, USSO made no distributions to its unitholders. However, if USSO’s daily changes in its per unit NAV had instead exactly inversely tracked the changes in the daily return of the Benchmark Futures Contract, USSO would have had an estimated per unit NAV of $40.51 as of December 31, 2010, for a total return over the relevant time period of -7.91%. The difference between the actual per unit NAV total return of USSO of -8.12% and the expected total return based on the inverse of the changes in the daily return of the Benchmark Futures Contract of -7.91% was an error over the time period of -0.21%, which is to say that the USSO actual total return underperformed the inverse of the benchmark result by that percentage.
SUTHERLAND ASBILL AND BRENNAN LLP
Sonia Barros
April 28, 2011
Page 2
In addition, the spot price of crude oil for immediate delivery purchased on December 31, 2009 and held to December 31, 2010 increased by 15.15%. USSO’s investment objective is to track the inverse of the changes in the price of the Benchmark Futures Contract, not to have the market price of its units inversely match, dollar for dollar, changes in the spot price of crude oil. As a result, the decrease in 2010 of the per unit NAV reflects the inverse of the increase in the price of the Benchmark Futures Contract and not the inverse of the changes in the spot price of crude oil. Contango and backwardation have impacted the total return on an investment in USSO units during the past year relative to a hypothetical direct investment in crude oil and, in the future, it is likely that the relationship between the market price of USSO’s units and changes in the inverse spot prices of crude oil will continue to be impacted by contango and backwardation. It is important to note that this comparison ignores the potential costs associated with physically owning and storing crude oil, which could be substantial. For a discussion of the impact of contango and backwardation, see ‘‘Risk Factors — Risks Associated With Investing Directly or Indirectly in Crude Oil — The price relationship between the near month contract and the next month contract that compose the Benchmark Futures Contract will vary and may impact both the total return over time of USSO’s NAV, as well as the degree to which its total return tracks other crude oil price indices’ total returns.’’ in this prospectus and ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations and the Crude Oil Market — Term Structure of Crude Oil Futures Prices and the Impact on Total Returns’’ in USSO’s Annual Report on Form 10-K filed on March 30, 2011, which is incorporated herein by reference.”
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If you should have any questions on the foregoing, please do not hesitate to contact Owen Pinkerton at (202) 383-0254 or me at (202) 383-0180.
Sincerely, /s/ James M. Cain James M. Cain |
Enclosure
| cc: | Nicholas D. Gerber |
Heather Harker, Esq.