WIRE:03/14/2000 18:01:00 ET Oil eases as OPEC looks to legitimise leaks LONDON, March 14 (Reuters) - Oil prices fell further from recent highs on Tuesday as main producers signalled they would turn a blind eye to cheating above current quotas when they increase supply in April. World benchmark Brent in London closed 55 cents lower at $28.34 a barrel, more than $3.50 down from last week's nine-year peaks. U.S. prices also tumbled, falling 33 cents to $31.69.

Fresh falls came after sources from oil cartel OPEC said l0eading producers want any extra supply produced from April unofficially to come on top of current leakage, estimated now at between 1.2 and 1.4 million barrels per day.

"OPEC has to arrive at a solution that takes into account the realities of the market. It doesn't matter whether the leakage is officially legitimised, or not, as long as it is accepted de facto," said one Iranian official.

This position -- which should allow OPEC to release more net supply than previously expected -- is believed to have the support of other major OPEC Gulf producers including Kuwait and Saudi Arabia.

A Saudi source, familiar with policy in the world's largest oil producer, told Reuters oil producers were moving towards increasing output from April 1 to meet expected heavy refiner demand and would not hesitate to satisfy market needs.

The source, speaking after the Brent futures market closed, said the exact amount of the increase would be decided when OPEC ministers meet on March 27 in Vienna.

"The trend right now is for OPEC and non-OPEC producers to increase production from the beginning of the second quarter by an amount reflecting expected demand," the Saudi source said.

He said the market "needs more oil and lots of it" as refiners were desperate for extra barrels to replenish low stock-piles and to increase runs to meet expected demand for gasoline in the third quarter, and gas oil in the fourth quarter.

"We have a responsibility as oil producers to satisfy this market and we should not hesitate. Our commitment to supply the world economy with adequate supplies is beyond doubt," he said.

It will be welcome news in the United States, where the Clinton administration has campaigned hard for OPEC to let prices fall amid fears of high gasoline prices, rising inflation and slower economic growth in an election year.

The threat that producers would keep the bulk of more than five million bpd of output cuts beyond a planned end-March expiry has fuelled U.S. fears of gasoline shortages come the peak summer driving season.

Debate ahead of the March 27 OPEC ministerial meeting will now centre on how much net new oil to release, and whether it will be enough to replenish consumer inventories.

The International Energy Agency (IEA) has said that OPEC needs to raise output by 2.3 million bpd in order to replenish stocks drained by producers' year-long supply restraint.

Smaller OPEC producers like Algeria and Libya have urged the cartel to wait until after the second quarter of this year -- when consumption traditionally weakens after winter -- before lifting supplies.

Outside OPEC, Mexico is expected no longer to restrain output at all, adding a further 300,000 bpd, although nothing is official yet.

Once an output hike is decided, producer powers would move quickly to pump more oil, a Gulf source said. "The oil would be produced immediately. All the systems are ready within their existing production capacity," the source said.

Public holidays this week among OPEC's Moslem states for the annual Haj pilgrimage to Saudi Arabia are likely to mean a break in preparations for OPEC's conference.

Prices in dollars per barrel:

Mar 14

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-- Martin Thompson (mthom1927@aol.com), March 15, 2000