USO has bounced 2.3% on the week to $108.92, clawing back some ground after a punishing 18% one-month decline — and for the first time in weeks, the lending market is telling a genuinely different story from the one that dominated June.
The structural shift in this note is availability. After spending most of June at emergency-tight levels — hitting zero on June 19, and below 3% on multiple days through late June — availability has opened up dramatically. It now reads 286%, meaning nearly three shares are available to borrow for every one already lent out. That is a complete reversal from the near-total lending lock that ran through the final two weeks of June. Cost to borrow has fallen in parallel, dropping 22% on the week to 6.1% — less than half the 14-15% range that prevailed through early June. The borrow market has genuinely loosened, not just bounced within a tight band.
That loosening tracks directly with continued short covering. Short interest has dropped another 13% on the week to 103.7% of float — down from roughly 117% a week ago, and from a peak near 130% earlier in June. The unwind is now running at pace: shorts have shed more than a quarter of their aggregate position over the past month. Previous notes flagged the pattern of brief availability windows that quickly slammed shut; the data this week suggests something more durable. Availability has held above 125% since July 1 after the June 30 reading of 6.6%. The short score has also eased, falling from the 72-73 range that persisted through late June to 62.4 — still elevated, but no longer flashing the extreme tightness signal of prior weeks. The combination of falling short interest, lower borrow costs, and opening availability all point in the same direction: the structural squeeze pressure that defined June has meaningfully reduced.
Options positioning adds a contrasting note. Despite the improved borrow conditions, options traders remain more defensively positioned than usual. The put/call ratio has eased to 1.30, but that is still below its 20-day average of 1.48 — running 1.6 standard deviations below the mean. That is not a bullish repositioning; it is a modest reduction in protective put demand, while puts continue to dominate the options flow. The 52-week range on the PCR runs from 0.56 to 2.52, and the current reading is firmly in the bearish half of that range. Options traders are less defensive than they were through June, but they have not rotated to a constructive stance.
The institutional picture is worth noting, given USO's unusual holder composition. As of the March quarter-end, Goldman Sachs held 52% of reported shares, with Morgan Stanley at 17% and Brevan Howard at 11%. These are not long-only value investors — they are market-makers, macro funds, and trading desks, which helps explain why short interest can mechanically exceed 100% of float without the standard squeeze dynamics that apply to ordinary equities. The insider data is entirely stale and irrelevant for this instrument.
What to watch now is whether the availability loosening holds or reverts. The June pattern — availability recovering briefly before collapsing again — repeated several times, and the current 286% reading is the highest in at least six weeks. If short covering continues at the current pace while availability stays open, the cost-to-borrow pressure that ran through June may stay subdued. If oil prices turn and new short demand re-enters, the question is whether the lending pool can absorb it — or whether USO reverts to the locked-borrow conditions that made June so structurally charged.
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