Dutch benchmark extends losses in well-supplied market

May 16 (Reuters) - The benchmark Dutch front-month contract fell to a fresh near 2-year low on Tuesday amid tepid demand and strong supply, but lower wind speeds supported day-ahead prices.

The Dutch front-month contract was 1.60 euros lower at 31.70 euros per megawatt hour (MWh) by 0821 GMT, its lowest level since June 2021, Refinitiv Eikon data showed.

"There are no news at the moment to change the fundamental picture on the market, which remains well-supplied, with storage levels well above average and expectations of a strong position ahead of next winter," analysts at Energi Danmark said in a research note.

Further losses on Tuesday were possible, they added.

Tepid demand and high inventories have also helped narrow the winter gas premium, providing growing confidence that the market will be able to withstand any supply shocks, Daniel Hynes, senior commodity strategist at ANZ bank said in a research note.

The Dutch winter contract was at 49.58 euros/MWh on Monday, down 4.52 euros compared with Friday. The contract had not traded on Tuesday morning according to Refinitiv data.

Europe's gas storage sites are 63.8% full, latest data from Gas Infrastructure Europe showed.

The Dutch day-ahead contract firmed by 0.08 euros to 31.68 euros/MWh, while the British day-ahead gas price gained 0.35 to 73.25 pence per therm.

UK gas for power demand for the day-ahead was up by 5 million cubic metres (mcm) per day to 75mcm/day on a softer renewable outlook, Refinitiv analyst Wayne Bryan said.

Peak wind power generation in Britain is forecast at 6.5 gigawatts (GW) for Tuesday, dropping to 2.5 GW on Wednesday, out of a total metered capacity of 22 GW.

However, rising temperatures and stronger wind and solar output will see demand fall the following days, according to Bryan.

"The fundamental picture is as such that sideways movement is expected to continue with prices edging lower barring the odd up day," Bryan said.

In the European carbon market, the benchmark contract was up 0.28 euro to 87.25 euros a tonne.