USO — the United States Oil Fund — entered the week in a new phase: the extreme borrow squeeze that defined the past month has partially unwound, yet short interest remains historically elevated and the fund itself dropped 10% on the week.
The most significant development is the shift in the lending market. For most of May, availability was effectively zero — every share in the pool was lent out, with cost to borrow peaking above 21% APR on May 20. That picture has changed materially. Availability recovered to nearly 19% by May 26, up from the near-zero readings that persisted for two full weeks. Borrow costs have eased to 16.6% — still elevated, still well above the 3.9% level seen in mid-April, but off the peak. The borrow market is no longer at maximum stress. It is merely expensive.
Short interest itself tells a story of stubborn conviction rather than capitulation. It dipped just 2.1% week-on-week to 104.6% of free float — down from the 108.5% peak cited in the prior note, but still above 100% of float, which means the aggregate short position can only be sustained via synthetic exposure through options or swaps. The month-on-month increase remains 15%, confirming that the positioning built over April and early May has not been meaningfully unwound. Shorts absorbed a 10% drawdown this week — the fund closed at $137 on May 26, off from last week's levels — without retreating in any size.
Options positioning adds texture to the bearish lean. The put/call ratio is running at 1.68, modestly above its 20-day average of 1.63 and a full standard deviation above that mean. The reading has drifted higher through May as the fund moved in both directions, consistent with continued demand for downside protection. The 52-week range on the PCR runs from 0.56 to 2.52, so the current level sits in the upper third — not extreme, but clearly not neutral.
Goldman Sachs and Morgan Stanley dominate the institutional holder list, together accounting for over 57% of reported shares. Both materially increased positions in the Q1 filing period — Goldman added more than 5 million shares, Morgan Stanley nearly 2 million. The presence of Brevan Howard, Jane Street, Citadel and several other trading-oriented firms as top holders reinforces that USO's shareholder base is predominantly tactical rather than strategic, making the register more sensitive to rapid position shifts if oil price momentum changes direction.
The ORTEX short score, at 73.2, has held remarkably steady all week, ranging only between 71.9 and 73.6 over the past ten sessions. The consistency of that elevated reading — rather than any spike or collapse — reflects a positioning regime that is dug in and not yet responding to the week's price weakness in either direction.
What to watch: whether the partial recovery in borrow availability stabilises above current levels or fades again toward zero, which would signal that the lending market is tightening back to its earlier stress regime despite the recent price decline.
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