By Scott DiSavino Feb 13 (Reuters) - An explosion on a major natural gas pipeline in southern Kentucky led to a forced evacuation of residents and injured at least one person early on Thursday. The explosion and fire in Knifley, Kentucky, about 90 miles (145 km) south of Louisville, could be seen "just as plain as day" from Columbia, about 12 miles from the blaze, a local police officer said. Part of the Columbia Gulf Transmission pipeline, that transports fuel from the Gulf Coast to the northeast and midwest, was shut and had been isolated from other sections of the line, said the pipeline owner NiSource Inc in a posting to customers. As yet the cause of the blast was unclear. "At this time there is no impact to commercial operations or shipper nominations," NiSource said However, traders said the incident could add strain to a system already stretched by high demand during one of the coldest winters in decades. Pipelines across the country are already filled to capacity and inventories are draining quicker than ever. Columbia Gulf Transmission consists of approximately 3,400 miles of pipeline, located primarily in Louisiana, Mississippi, Tennessee and Kentucky. The Columbia system is interconnected to virtually every major pipeline system operating in the Gulf Coast and interconnects with pipelines serving markets in the Midwest, Southeast and Northeast. "Columbia Gulf operating teams detected a drop in pressure on the company's Line 200 pipeline in Adair County. Our operating crews immediately responded to the alert and determined that there was a rupture in the pipeline," the company said in a statement. Police were notified of an explosion at about 1 a.m. local time (0700 GMT) on Thursday, said Adair County Emergency Management Director Greg Thomas. The explosion spawned multiple woodland and structural fires, Thomas said. Three homes were set ablaze, two of them were fully destroyed, as well as two barns and four cars. The one injured person was sent to an area hospital but the extent of injuries was not known, Thomas said. The fires had largely been contained and were being allowed to burn out. BAD DAY TO LOSE A PIPELINE Natural gas traders and analysts said this was a tough day to lose a big pipeline as the gas pipelines in the Northeast are already operating near capacity due to the winter storm battering the East Coast with heavy snow. The 30-inch pipeline supplies some of the fuel used to heat millions of homes and businesses in the Northeast and Midwest. "The blast intersects badly with snowstorm-induced demand in the Northeast, likely to send electric power costs spiking and natural gas spot prices to industrial and commercial users sharply higher over the next few days at the minimum," said Richard Hastings, macro strategist at Global Hunter Securities. On the New York Mercantile Exchange, natural gas futures for March were trading up more than 5 percent to $5.07 per million British thermal units at 11:30 a.m. EST. LCI Energy Insight, a gas analysis firm, said its database indicates the explosion likely occurred near where Columbia Gulf delivers into Texas Eastern at a rarely used or winter only service interconnect in Adair County. Texas Eastern is owned by a unit of Spectra Energy. The point has capacity of just over 200 million cubic feet per day and it had been flowing 105 mmcf on Wednesday but has since been reduced to only 60 mmcf for Thursday, LCI said, noting the volume Wednesday was the largest amount through this meter since last March. Columbia Gulf is part of NiSource's Columbia Pipeline Group, which owns and operates more than 15,700 miles of natural gas pipelines serving customers in more than 16 states and one of the largest underground storage systems in North America. Approximately 1.3 trillion cubic feet of natural gas flows the Columbia Pipeline systems each year, according to the company's website.