To confirm your finding you can insulate that part of the wire and see how it runs.?
If you care about not buying a new sensor, many universal aftermarket sensors come with wire connectors displace into the OEM plastic connector so it's very likely you can patch that issue and continue many more trouble free miles.
This looks like the issue. Bare wire at the o2 sensor was contacting the heat shield. I¡¯ve got the wiring harness put back together and installed. Will pick up a new sensor tomorrow and cross my fingers! Decided not to add the fuses to the main relay circuits. Wish I would have looked closer at the o2 sensors early on but didn¡¯t realize how it was all connected at the time.?