USO — the United States Oil Fund — has had a brutal week, falling 12% to $115.47 and extending a one-month drawdown of 22%, yet the lending market has flashed a surprisingly contradictory signal: availability has widened sharply even as crude's slide rewards the short thesis.
The borrow picture is genuinely unusual this week. A week ago, availability had climbed to 42.7% after spending most of May pinned near zero — itself a notable loosening flagged in last week's note. Now availability has lurched further, to 18.6% on Tuesday after touching a single-day reading of just 1.2% on Monday. That intraday whipsaw — essentially a full squeeze of the lending pool on June 15, followed by a meaningful release the next day — is the most striking technical development of the week. Cost to borrow has eased to 10.0% APR, down from 12.4% a week ago and well below the 21% peak hit in late May. The direction of travel on borrowing costs is clearly easing, but a 10% annualised rate on an ETF is still punishing for anyone holding a short into a falling market with no obvious catalyst for reversal.
Short interest itself tells a more stable story. The position edged down fractionally on the week — off 0.5% day-on-day — but at 144.9% of free float it has barely moved from the 145% level reported last week. That figure is structurally elevated for a commodity ETF and reflects the mechanics of USO's creation-redemption structure as much as pure bearish conviction: authorised participants routinely hold short positions as part of hedging creation units. The month-over-month increase of 39% in shares short, however, is too large to explain away entirely as mechanical. Real bearish flow has built into this position over May and June. The ORTEX short score of 72, while slightly off its recent peak of 73.5, remains in elevated territory and has been sticky at these levels for two weeks.
Options positioning, by contrast, has pulled back marginally from its most defensive extreme. The put/call ratio of 1.58 is slightly below its 20-day average of 1.63 — a z-score of -1.15 — meaning options traders are, at the margin, a touch less hedged than they were through May and early June. That is a mild divergence from the short-interest story. The PCR has ranged from 0.56 to 2.52 over the past year; at 1.58 it remains structurally put-heavy, which is normal for a commodity ETF used as a hedging instrument, but the recent drift lower in the ratio is notable given the severity of the price decline this week.
The institutional holder list adds useful context. Goldman Sachs holds 43% of reported shares, Morgan Stanley 14%, with Brevan Howard, Jane Street and Citadel also among the top holders. This is a professional trading and hedging roster, not a retail-driven fund — the short interest dynamics here are almost entirely driven by institutional positioning and structured products activity. Insider data is not relevant for USO given its fund structure.
The week to watch is what happens to availability from here. Monday's near-complete exhaustion of the lending pool — availability at 1.2% — followed by Tuesday's partial reopening suggests the borrow market remains unstable. Whether cost to borrow continues its gradual descent or snaps back toward the May highs in response to further price weakness is the cleanest read on whether the short-side pressure is structuring or unwinding.
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