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Oil futures settled nearly 7 percent lower on Wednesday after government data showed the largest weekly increase in U.S. crude inventories since 2001 and a day after Saudi Arabia reported record production in March.

U.S. May crude closed down $3.56, or 6.6 percent, at $50.42 a barrel. The commodity has erased 2015's gains and is now down 5.4 percent on the year. Meanwhile, Brent May crude was down $3.30 at $56.90 a barrel.

U.S. crude oil inventories surged 10.95 million barrels to a record 482.39 million in the week to April 3, the Energy Information Administration (EIA) said in its weekly report.

A Reuters survey of analysts had yielded a forecast for a build of 3.4 million barrels.

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"The report is very bearish with the large crude oil inventory build and the somewhat surprising rise in gasoline inventories," said John Kilduff, partner at Again Capital LLC in New York.

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Crude oil inventories at the Cushing, Oklahoma, storage hub and delivery point for the U.S. crude contract rose by 1.2 million barrels, the EIA said, a much bigger jump than expected.

U.S. crude oil imports rose by 869,000 barrels per day (bpd) to 7.7 million bpd.

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Gasoline inventories rose 817,000 barrels, compared with analysts' expectations for a 1 million barrel drop, as refiners increased capacity utilization.

The reported build sent U.S. RBOB gasoline futures went into sharp retreat, down 9.20 cents at $1.7689 a gallon.

The EIA data arrived a day after Saudi oil minister Ali al-Naimi said that Saudi Arabia's output would likely remain around 10 million bpd after posting a record high of 10.3 million bpd in March.

Naimi also said the kingdom stood ready to "improve" prices but only if producers outside the Organization of the Petroleum Exporting Countries joined the effort.

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Iraq and Libya also increased their output for March, further adding to OPEC production, which came to about 31.5 million bpd last month, according to analyst Olivier Jakob at Swiss-based Petromatrix.

"With such a level of OPEC production it will be difficult to escape large stock-builds throughout the year," he said in a note.