UK GAS-UK gas prices rise on weaker pound, Dutch output curb fears

* Pound at 31-year low

* Expected cut in Dutch gas output adds to squeeze

June 24 (Reuters) - British wholesale natural gas prices rose on Friday after the pound tumbled against the euro after Britain country voted to leave the European Union, making gas more attractive to purchase.

Financial market volatility caused by the EU referendum result kept gas trading volumes thin at the UK hub as dealers digested the short- and long-term consequences of the decision, traders said.

Earlier in the session, trading screens were blank for a lengthy period across Europe's leading gas markets, including the British and Dutch hubs.

"Currency-wise, prices should be going up but economically this is a big worsening to the overall economy," one trader said in reference to the impact of the Brexit vote.

"All indices and commodities are being slaughtered," he said.

The pound fell as much as 10 percent against the U.S (Other OTC: UBGXF - news) . dollar to touch levels last seen in 1985, on fears the decision could hit investment in the world's fifth-largest economy.

The euro also dropped sharply against the dollar.

UK gas for July delivery rose 1.2 pence per therm or 3.6 percent to 34.50 p/therm by 0958 GMT, while the day-ahead contract jumped 1.00 pence to 34.60 p/therm.

Gas for sale on Friday showed the slimmest gains - up 0.40 p/therm to 34.40 p/therm - also because the transmission network was undersupplied.

According to National Grid (LSE: NG.L - news) data, daily supply estimated at 143.9 million cubic metres/day (mcm) fell short of demand at 146.5 mcm/day, leaving the system short of gas.

"Liquidity on the (UK gas market) has been thin at best with wide bid/offer spreads, though contracts have firmed in line with the fall in the value of sterling," Marcel Boonaert, head of trading and portfolio at Wingas UK said.

"Pending news from the Dutch government over the potential for a cut in production from the Groningen field could see further gains on curve contracts, with the front season already offered over a penny higher," he added.

The Dutch government is expected to make an announcement regarding a decision to cut output from the country's Groningen gas field later on Friday.

In the Netherlands, the day-ahead gas price at the TTF hub fell by 0.30 euro/megawatt hour or 1.98 percent to 14.85 euros/MWh.

(Reporting by Oleg Vukmanovic, editing by Nina Chestney)