USO — the United States Oil Fund — enters the week with the first meaningful loosening of its borrow market in over a month, yet the short position has barely budged, leaving the fund in an unusual state of partial relief that falls well short of normalisation.
The shift in the lending market is the week's headline development. Availability has climbed from a near-zero floor to 42.7% — a dramatic move in absolute terms, but still firmly in tight territory by historical standards. For context, availability spent the entire period from early May through June 8 pinned below 6%, and hit zero on multiple occasions. The 52-week low is zero; the high is 100%. At 42.7%, there is now roughly one share available for every two already borrowed, compared to virtually nothing a week ago. That said, cost to borrow has only eased to 12.4% APR — down 14% on the week but still more than double the mid-April level. The lending market has decompressed, but it has not normalised.
What makes the loosening notable is what has not happened alongside it: short interest has not retreated. The short position edged up another 3% on the week to 145% of free float, extending a 57% surge over the past month. A position this large cannot be held through stock borrows alone — at 145% of float, the overhang points to substantial synthetic exposure via swaps or derivatives. The ORTEX short score holds at 73, barely changed from the prior week, reinforcing the picture of entrenched rather than escalating bearish conviction. Shorts have not covered on the availability relief; they have simply become slightly cheaper to maintain.
Options positioning adds a layer of context. Put/call activity is running at 1.63 — persistently elevated but fractionally below the 20-day mean of 1.65. The z-score is marginally negative, meaning options traders are no more defensive than their recent baseline, even as the fund has fallen 4.4% on the week to $131.30 and is down 2.8% on the day. The options market is not amplifying the bearish thesis right now; it is simply reflecting the durable, low-intensity put-heavy baseline that has characterised USO positioning for weeks.
Institutional ownership gives some colour on who is holding the other side. Goldman Sachs reported 43% of shares held as of March 31, with a net addition of over 5 million shares. Morgan Stanley added nearly 2 million shares in the same period. These are broker-dealer positions rather than directional asset managers, likely reflecting hedging and market-making activity tied to the derivatives book — consistent with the synthetic short overhang implied by SI above 100%.
The key tension to watch is whether the availability recovery holds or reverses. The pattern through May and early June was sharp, brief reprieves followed by rapid returns to near-zero — availability was above 20% on April 29, collapsed through May, touched zero repeatedly, then briefly recovered to 28% on June 1 before crashing back to 1.4% on June 2. This week's bounce to 42.7% is the largest single recovery in that sequence. Whether shorts are actually returning shares or the lending pool is simply expanding will determine whether the borrow market has genuinely turned a corner or is setting up for another collapse.
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