"The oil rebound has run out of gas and now you are seeing nervous investors with itchy trigger fingers bailing out of USO," notes Bloomberg, as the biggest US ETF that tracks oil is heading for the largest two-month outflow in six years, raising concern that crude’s 30% rally may stall. As BNP points out, "we do not think that the bulls have enough supporting fundamental factors to make a case for a higher oil price," and judging by the mass exodus from USO, as Bloomberg concludes, knife-catching 'investors' "don’t want to get burned by another drop in oil."

As Bloomberg reports,

Holders of the United States Oil Fund, known as USO, have withdrawn almost $1 billion so far in April and May, according to data compiled by Bloomberg. Crude dropped about $12 a barrel after a $1.4 billion exodus from the fund in the two months ended June 2009.

Oil has rebounded from a six-year low in mid-March on speculation that the falling number of drilling rigs will reduce output. U.S. crude stockpiles near the highest level in 85 years and OPEC’s refusal to cut production will continue to weigh on prices, according to Goldman Sachs Group Inc., Deutsche Bank AG and Citigroup Inc.

...

The U.S. Oil Fund was at $19.56 Thursday, up from a record low of $15.96 on March 17. USO, which holds about 10 percent of the front-month July WTI contracts, jumped 22 percent in April and is down 4.6 percent so far this month. The ETF’s performance is trailing oil because the market is in contango, meaning futures for delivery in later months trade higher than nearby contracts. The structure erodes gains as the ETF sells the expiring contract and buys the more expensive next-month futures.

...

The Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s oil, meets June 5 in Vienna to discuss output policy. The group will maintain its production target, Mohammad Oun, Libya’s deputy vice prime minister for energy, said Thursday, joining Kuwait in predicting no policy change.

“We do not think that the bulls have enough supporting fundamental factors to make a case for a higher oil price,” Harry Tchilinguirian, BNP Paribas SA’s London-based head of commodity markets strategy, said Thursday. The supply surplus will push oil down to “$55 and then possibly lower,” he said.

*  *  *
As one analyst concluded,

“Investors were anticipating a bounce and they started selling as soon as it happened... People are cashing in some of their short-term chips.”

Indeed they are - at the fastest pace since the financial crisis.