NEW YORK: Cotton futures settled higher Thursday on speculative short-covering as they rebounded from ending previously at a 2-1/4-year low, but analysts said the market remainsed vulnerable to further losses due to a shaky outlook for the global economy.
Benchmark July cotton on the ICE Futures US exchange settled up 2.43 cents, or 3.4 percent, at 73.94 cents per lb after ranging from 71.87 to 74.50 cents.
On Wednesday, the contract ended at 71.51 cents in the lowest settlement for the spot cotton contract since early February 2010, according to Thomson Reuters data.
December cotton rose 1.92 cents or 2.8 percent to close at 70.67 cents, dealing between 68.90 and 71.03 cents. It was an inside day as that range held within Wednesday's 67.73 to 71.40 band.
"We were big time oversold," said Jobe Moss, an analyst for brokers and merchants MCM Inc in Lubbock, Texas.
The 14-day relative strength index reading stood near 31. A reading of 30 or lower means the market is oversold and one of 70 or above meant a market is overbought.
Moss said gloomy economic prospects in the world economy could eventually push values down to the area of 60 cents in the weeks ahead.
Traders said that aside from fears over the euro zone, talk continued to circulate that top cotton consumer China may be selling some of its state reserves and that some cancellations of US cotton exports may have taken place as the price tumbled.
Traders said any cancellations by China will only show up in the US Agriculture Department's weekly export sales report next week when the activity for this week is tallied.
Volume on Thursday reached slightly over 27,000 lots, about 11 percent below the 30-day norm and the first time in five sessions that volume traded may have fallen, Thomson Reuters data showed.
The amount traded on Wednesday stood at 36,985 lots, having risen for the fourth straight session to its highest level since May 11, according to exchange data.
Open interest in the cotton market, an indicator of investor interest, amounted to 190,932 lots as of May 23, the highest level since April 5, ICE data showed.
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