Oil dropped from the highest price in almost three weeks in New York on signs U.S. crude stockpiles are rising and speculation Saudi Arabia may boost output.

Futures slipped as much as 0.4 percent after gaining for a second day. U.S. inventories climbed to the highest level in six months last week as refineries idled units and imports from Canadaincreased, according to a Bloomberg News survey before a government report tomorrow. Saudi Arabia’s cabinet will work with oil consumers and producers to restore “fair” prices, according to the state news agency.

Oil for April delivery slid as much as 38 cents to $107.71 a barrel in electronic trading on theNew York Mercantile Exchange and was at $107.78 at 11:05 a.m. Sydney time. It gained 1 percent to $108.09 a barrel yesterday, the highest close since March 1. The April contract expires today. The more actively traded May future fell 33 cents to $108.23 a barrel. Prices are up 9.1 percent this year.

Brent oil for May settlement declined 41 cents to $125.30 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $17.07 toNew York futures for the same month.

U.S. crude inventories probably rose 2.1 million barrels last week, according to the median of six analyst estimates in a Bloomberg News survey. It will be the fifth weekly gain.

Saudi Arabia, the world’s biggest crude exporter, seeks fair prices because of the negative impact that may stem from an increase in energy costs for the world economy, the cabinet said after its weekly meeting, according to a statement carried by the official Saudi Press Agency yesterday. It didn’t mention any figure.

The kingdom boosted its output in January to the second highest level since at least 1980, according to the Joint Organization Data Initiative. Some importers are seeking substitutes for crude they normally buy from Iran, the head of research for Jadwa Investment Co. said.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore atakwiatkowsk2@bloomberg.net

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