The piece of paper a USO investor holds is shares in the fund. The fund itself holds the futures that are contracts for oil delivery. Limited liability protects the fund's shareholders.
The contracts will be liquidated first, if possible. If the fund is still left holding some then the exchange and market makers will absorb the losses with their excess capital and insurance policies.
It takes special clearance to even trade contracts that are physically settled. Most of the time these contracts are just cash-settled instead.