Shares of the United States Oil Fund slid to $103.22 on July 1, shedding 3.0% in a single session as traders locked in profits following a sharp crude inventory draw that, paradoxically, failed to sustain bullish momentum. The retreat raises a pointed question for USO holders: is this a healthy pause in a supply-tight market, or the start of a deeper pullback driven by economic anxiety? USO Slides 3% on Profit-Taking Despite Tight Supplies — Will the Hormuz Recovery Overshoot Demand?
Shares of USO fell 3.0% to $103.22 on July 1 as traders cashed in recent gains even as fresh government data confirmed a tight physical oil market. The pullback punctuates a volatile stretch: USO has swung between roughly $105 and $109 over the past week, mirroring a crude market caught between shrinking stockpiles and rising fears that a flood of supply is coming back online through the Strait of Hormuz.
A Big Inventory Draw That Couldn't Hold the Price Up
U.S. crude inventories fell by 3.8 million barrels in the week ending June 26, dropping commercial stockpiles to 408.4 million barrels — now 7% below the five-year seasonal average. That kind of draw normally lifts prices. Instead, crude futures were down in mid-morning trading, signaling that bullish supply data has already been priced in and that traders are booking gains from the spring rally. For USO holders, the message is stark: tight inventories alone won't protect the ETF if the macro backdrop softens.
Manufacturing Signals Went Two Ways at Once
The ISM Manufacturing PMI registered 53.3% in June, 0.7 percentage points lower than in May, a modest deceleration that spooked energy markets even though the reading still signals growth. Meanwhile, the S&P Global U.S. Manufacturing PMI rose to 55.7, its highest since May 2022. The split verdict — one survey cooling, the other surging — gave risk-averse traders a reason to trim oil bets, and USO paid the price.
The Real Wild Card: Hormuz Tanker Traffic Is Creeping Back
Oil tanker traffic continues to recover, with shipments increasing after the U.S. and Iran halted their recent exchange of fire over Hormuz.
Analysts have warned of a looming supply glut as exports rebound faster than expected, with Iran shipping more than 40 million barrels since the U.S. lifted its naval blockade, while Russian exports surged to record levels.
The EIA assumes shipments through the strait resume in Q3 2026 but expects it will take several months to ramp to pre-conflict traffic, which it doesn't see occurring until early 2027. Every additional tanker that clears the strait erodes the geopolitical fear premium baked into USO's price.
What It Means for USO Shareholders
WTI recorded roughly a 30% drop in Q2, its largest quarterly decline since 2020, yet USO still trades well above its 52-week low near $66. The fund's trajectory hinges on one question: will reviving Hormuz flows outpace global demand? If supplies normalize faster than the EIA expects, USO's support level could crack further. If geopolitical setbacks slow the reopening, today's dip may look like a buying opportunity. Either way, the easy gains from the crisis premium are over.