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Money managers have never been more certain that oil prices will drop.

They increased  bets on falling crude by the most ever as stockpiles climbed to the highest seasonal levels in at least two decades, nudging prices toward a bear market. The excess supply hammered the second-quarter earnings of Exxon Mobil Corp. and Chevron Corp. Inventories are near the 97-year high reached in April as oil drillers boosted rigs for a fifth consecutive week.

The rise in supplies will add more downward pressure,†said Michael Corcelli, chief investment officer at Alexander Alternative Capital LLC, a Miami-based hedge fund. It will be a long time before we can drain the excess.â€

Hedge funds pushed up their short position in West Texas Intermediate crude by 38,897 futures and options combined during the week ended July 26, according to the Commodity Futures Trading Commission. It was the biggest increase in data going back to 2006. WTI dropped 3.9 percent to $42.92 a barrel in the report week, and traded at $41.19 at 8:23 a.m.

WTI fell by 14 percent in July, the biggest monthly decline in a year. It's down by 19 percent since early June, bringing it close to the 20 percent drop that would characterize a bear market.

U.S. crude supplies rose by 1.67 million barrels to 521.1 million in the week ended July 22, according to U.S. Energy Information Administration data. Stockpi...