Oct 4 (Reuters) - ICE cotton futures on Wednesday climbed nearly 2 percent and hit a three-week high as investors covered short positions on concerns that severe weather could threaten the crop and disrupt the ongoing harvest in the United States.

Cotton contracts for December settled up 1.28 cents at 68.8 cents per lb. Prices rose to 69.97 cents per lb to the highest level since Sept. 12 earlier in the session, after slipping to a six-week low on Tuesday. The December contract rose 1.90 percent, the biggest percentage gain since Sept. 5.

Tropical DepressionSixteen has formed in the southwestern Caribbean Sea and is expected to strengthen to a tropical storm later on Wednesday, the U.S. National Hurricane Center (NHC) said. "The tropical depression could head into the Gulf of Mexicoand become a possible hurricane by Sunday, moving into the south east of Deltaregion and threaten the crops ... that caused some short-covering," said Peter Egli, director of risk management at British merchant Plexus Cotton.

Weather in the top cotton-producing U.S. state of Texas was getting colder, which was bullish, he said. The USDA's weekly crop progress report on Monday showed about 17 percent of the cotton crop in the United States had been harvested by the week ended Oct. 1 compared with a five-year average of 13 percent.

Total futures market volume rose by 15,730 to 34,715 lots. Data showed total open interest fell 1,700 to 229,503 contracts in the previous session. Certificated cotton stocks deliverable as of Oct. 3 totaled 4,234 480-lb bales, up from 3,827 in the previous session.

(Reporting by Swati Verma and Nallur Sethuraman in Bengaluru; Editing by Lisa Shumaker)