USO dropped 5.2% on Tuesday to $115.78, its sharpest single-day fall in weeks, and short interest nudged higher on the same day — a small but telling move that suggests some bears are adding into weakness rather than retreating.
Short interest climbed 3.1% on August 4 to 93.3% of the free float, reversing a modest pullback seen through late July. That one-day tick upward matters in context: the week-on-week reading is still down 4.1%, and the month-on-month figure shows a 22% decline from June's peak near 15.4 million shares short. The trend since June has been net covering, but it has been consistently interrupted — twice by sharp rebuilds, and now potentially a third time. At 93% of float, estimated shorts still represent almost the entire free float. This is not a position level that fades into the background.
The borrow market tells a more relaxed story than it did a fortnight ago, which is itself worth noting. Availability has climbed back to 122% — meaning lenders currently have more shares available than there are shares already borrowed. That is a genuine loosening: as recently as July 21-22, availability had collapsed to near-zero, forcing borrowing costs toward their highest readings of the period. Cost to borrow now runs at 4.3%, roughly half the 8-10% levels seen in late June, and has eased 40% on a one-month basis. Shorts can still find shares; the lending market is not in distress. The contrast with late July — when every share in the pool was lent out — is stark.
Options positioning has normalised considerably since the elevated defensive readings of late June. The put/call ratio sits at 1.10, just a fraction below its 20-day average of 1.11 and roughly flat on the week. The z-score of -0.19 points to no meaningful skew in either direction. A year ago options traders were running put/call ratios above 1.5; that caution has steadily unwound through July as the fund rallied 11% on a one-month basis before Tuesday's reversal. The current options picture reads as broadly neutral — no outsized hedging demand, no unusual bullish positioning.
The institutional holder register adds useful texture. Goldman Sachs is by far the largest holder, with 52% of reported shares, unchanged as of June 30. Morgan Stanley entered aggressively in Q1, adding nearly 2 million shares. Brevan Howard, Jane Street, and CIBC also built fresh positions in that same quarter. The clustering of macro funds and market-makers around USO is consistent with hedging activity tied to crude exposure — these are not long-only fundamental investors, and their positions are likely tactical rather than directional.
The ORTEX short score holds at 67.3, broadly stable over the past ten days after pulling back from near-70 in late July. That level reflects elevated but not extreme short-side pressure — positioning that is heavy, but not at the acute squeeze-risk readings seen in June when availability was below 5%. What to watch next is whether Tuesday's one-day increase in shares short proves a single-session reaction to the sell-off, or the opening move of another rebuild cycle of the kind that twice interrupted the broader unwind since June.
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