The spot December cotton contract on ICE Futures US increased 1.55 cents or by 1.5 percent to finish at $1.0079 per lb, moving from 97.79 to $1.009.

The now-active March cotton futures fell 1.42 cents to settle at 96.62 cents a lb.

Total volume traded Monday hit around 31,000 lots, more than two thirds above the 30-day norm, preliminary Thomson Reuters data showed.

Mills who need to cover positions are forced to scramble to do so as the delivery period starts next week, dealers said.

Analysts said the large premium enjoyed by the December contract over March raises the prospect of a squeeze similar to the one seen in the market when the May and July 2011 cotton contracts went into delivery.

"The general feeling is somebody's going to squeeze Dec(ember)," said a dealer in Texas, the top cotton growing state in the United States.

On a technical level, dealers said the upside target would be $1.04 and the downside target is at 95.78 cents, basis December.

Open interest in cotton, usually taken as an indicator of investor exposure in cotton, stood at 145,304 lots as of Nov 11, exchange data showed.

Total volume traded Friday in the cotton market reached 38,056 lots, the highest since June 10, ICE futures US data said.