COPENHAGEN, Nov 13 (Reuters) - Seismic activity in southwestern Iceland decreased in size and intensity on Monday, but the risk of a volcanic eruption remained significant, authorities said, after earthquakes and evidence of magma spreading underground in recent weeks.

Almost 4,000 people were evacuated over the weekend as authorities feared that molten rock would rise to the surface of the earth and potentially hit a coastal town and a geothermal power station.

Located between the Eurasian and the North American tectonic plates, among the largest on the planet, Iceland is a seismic and volcanic hot spot as the two plates move in opposite directions.

The Icelandic Meteorological Office said on Monday there was a "significant likelihood" of an eruption in the coming days on or just off the Reykjanes peninsula near the capital Reykjavik, despite the size and intensity of earthquakes decreasing.

"We believe that this intrusion is literally hovering, sitting in equilibrium now just below the earth's surface," said Matthew James Roberts, director of the service and research division at the meteorological office.

"We have this tremendous uncertainty now. Will there be an eruption and if so, what sort of damage will occur?" he said.

Thorvaldur Thordarson, professor in vulcanology at the University of Iceland, said the most recent data indicated a smaller risk of an eruption in the area around the town of Grindavik.

Inhabitants of Grindavik described being whisked from their homes in the early hours of Saturday as the ground shook, roads cracked and buildings suffered structural damage.

Hans Vera, a Belgian-born 56-year-old who has lived in Iceland since 1999, said there had been a constant shaking of his family's house.

"You would never be steady, it was always shaking, so there was no way to get sleep," said Vera, who is now staying at his sister-in-law's home in a Reykjavik suburb.

"It's not only the people in Grindavik who are shocked about this situation it's the whole of Iceland."

Almost all of the town's 3,800 inhabitants had been able to find accommodation with family members or friends, and only between 50 and 70 people were staying at evacuation centers, a rescue official said.

Some evacuees were briefly allowed back into the town on Sunday to collect belongings such as documents, medicines, or pets, but were not allowed to drive themselves.

"You have to park your car five kilometers from town and there are 20 cars, huge cars from the rescue team, 20 policemen, all blinking lights, it's just unreal, it's like a war zone or something, it's really strange," Vera said.

The Reykjanes peninsula is a volcanic and seismic hot spot southwest of the capital. In March 2021, lava fountains erupted spectacularly from a fissure in the ground measuring between 500-750 meters long in the region's Fagradalsfjall volcanic system.

Volcanic activity in the area continued for six months that year, prompting thousands of Icelanders and tourists to visit the scene. In August 2022, a three-week eruption happened in the same area, followed by another in July of this year.