USO has dropped another 4.3% on the week to $106.44 — extending a brutal 17.5% one-month slide — and the short unwind that began mid-June is accelerating, even as the lending market refuses to fully relax.
The most notable development this week is the continued reduction in short positions. Short interest fell 15.4% over the past week to 116.7% of float — down from roughly 126% a week ago and from a peak near 130% earlier in June. That is a meaningful cover, not a rounding error. The direction is clear: shorts are taking profits into the oil weakness rather than pressing the trade further. Over the past month, however, short interest has actually grown 11%, which is the broader context — this week's covering is a partial unwind of a position that was rebuilt aggressively through May and early June.
The borrow market tells a more complicated story, and it is one readers of the prior notes will recognise. Availability tightened sharply again, falling to 6.6% — meaning roughly one share remains available to borrow for every fifteen already lent out. That is a sharp reversal from the 14.2% reading flagged in Monday's note, which itself was already well inside the tight threshold. The pattern across June has been consistent: brief windows of loosening, followed by rapid re-tightening. Availability touched 118.8% on June 22, collapsed to 2.1% by June 25, recovered to 14.2% by June 29, and has now tightened back to 6.6%. Each recovery has been shallower and shorter-lived than the last. Cost to borrow moved in the opposite direction on the day — rising from 5.2% to 7.8% — after last week's sharp drop, suggesting the brief CTB relief was equally temporary. For context, CTB peaked near 21% in late May. The current level is lower, but the intraweek bounce is a reminder that the directional easing has stalled.
Options positioning has shifted in a notable direction. Put/call ratio has dropped to 1.37 — two standard deviations below its 20-day average of 1.55 — marking the least bearish options setup USO has seen in recent weeks. The 52-week range runs from 0.56 to 2.52, so the absolute level still leans bearish, but the move away from the recent average is meaningful. Fewer puts are being bought relative to calls. That is consistent with the short-covering narrative: participants who were hedged or outright short are reducing exposure, not adding. The short score at 71.9 remains in the elevated band it has held since mid-June — the brief dip to 65.1 on June 22 fully reversed, as noted in prior coverage.
One structural feature worth keeping in mind: USO's short interest exceeding 100% of float is a product of its ETF mechanics, where creation and redemption activity can generate apparent short positions exceeding the outstanding share count. The figure is therefore not directly comparable to equity short interest. What matters more for the lending story is the direction — and on that basis, shorts are covering — and the availability signal, which remains structurally tight despite the nominal reduction in shares short.
What to watch next: whether availability can sustain a reading above 10% for more than two consecutive sessions — something it has failed to do all month — and whether the cost to borrow resumes its prior downtrend or stabilises at current levels, which would indicate the borrow squeeze has found a floor rather than resolved.
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