USO fell 6.5% on the week to $120.49, and the extreme short-covering tension that had built through July 21 has partially unwound — but the picture is messier than a simple retreat.
The previous note, published July 22, caught shorts rebuilding aggressively from 83.7% of float back above 100%, with availability collapsing to near-zero. That emergency tightness has now eased materially. Short interest pulled back from its 100.8% peak, trimming roughly 1.2% on the week to land at 93.2% of float. That is still an extraordinary level — estimated shorts remain equivalent to nearly the entire free float — but the directional pressure has shifted. Shorts actually covered on both July 27 and July 28, with shares short falling from around 13.7 million earlier in the week to 12.3 million by Tuesday's close. The month-over-month picture tells the fuller story: short interest is down 32% from its June peak of roughly 19 million shares short, a sustained unwind that has been interrupted twice by sharp rebuilds.
The borrow market has loosened in step with the covering. Availability climbed back to 84% by July 28 — up dramatically from the near-zero readings of July 21-22, when the borrow pool had been almost entirely exhausted. That is still well below the 150-300% range seen in early July, when the borrow market was genuinely relaxed, but the shift from critical tightness to something closer to normal is clear. Cost to borrow has also eased, falling 24% on the week to 4.3% — down from the 10-12% range seen in mid-June. For context, availability twice hit zero during the June squeeze; the current reading is a genuine improvement, not a cosmetic one.
Options positioning has turned notably less defensive. The put/call ratio has dropped to 1.05, roughly one standard deviation below its 20-day average of 1.18 — a marked change from the heavily put-skewed readings of 1.4 to 1.6 that persisted through June and into early July. That shift matters: for most of the past six weeks, options traders were paying elevated prices for downside protection on crude exposure. The recent drift lower in PCR suggests that hedging demand has faded alongside the price decline. The 52-week range on the PCR runs from 0.56 to 2.52, so the current reading is near the middle — neither bullish nor alarmed.
The ORTEX short score of 68.7 warrants a note. It has been relatively stable in the high-60s to low-70s range all month, implying that despite the swings in raw short interest levels, the composite short-selling pressure signal has not fundamentally shifted. The score briefly dipped to 60.2 on July 22 — the same day availability hit near-zero — before snapping back above 69. A score in the high-60s sits in elevated territory without being at its most extreme, consistent with a fund that continues to attract meaningful short positioning but has stepped back from the June emergency levels.
The institutional holder base is dominated by market-makers and trading firms — Goldman Sachs holds 52% of reported shares, with Morgan Stanley, Brevan Howard, Jane Street, and Citadel among the other top names. This is a trading-book-heavy register, which helps explain the mechanical and rapidly reversing short-interest patterns: these are not long-term conviction holders, and flows in and out of the borrow pool can shift quickly in response to crude price moves or ETF creation/redemption activity. The sharp 3.4% single-day drop on July 28 may itself be generating fresh hedging demand that the data has not yet fully captured.
What to watch: whether the latest price weakness reignites short rebuilding — the pattern over the past six weeks has been for shorts to add on rallies and partially cover on declines, and a further drop in crude testing that dynamic from the other direction will be the clearest signal of what comes next.
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