* Prices trade in tight range, subdued volume on lack of spec interest
* USDA slightly reduces outlook for U.S. production
* World inventories forecast upped to fresh record for 2013/14
NEW YORK, Dec 10 (Reuters) - Cotton futures advanced on Tuesday as the U.S. government reaffirmed its expectations for tight supplies in the United States, the world's top exporter.
The most-active March cotton contract on ICE Futures U.S. edged up 0.33 cent, or 0.4 percent, to settle at 80.69 cents a lb.
Activity and volumes were subdued, as prices traded in a tight range between technical support near 79.50-80 cents a lb and resistance near 81 cents.
Cotton held its earlier gains after a U.S. Agriculture Department monthly forecast deemed largely "neutral to bearish," according to Sharon Johnson, a cotton specialist with KCG Futures in Atlanta.
The USDA's expectations of tight U.S. supplies buoyed prices throughout the session, as the agency slightly reduced its outlook for production in the world's top exporter.
The report held few surprises for traders but for a notable increase to beginning stocks in No. 2 producer India and a forecast for output in top producer China that was reduced less than many traders were expecting.
"None of the changes were shocking. There was very little change to the U.S. picture, and the changes abroad were low as well," said Chris Kramedjian, a risk management consultant for INTL FCStone in Nashville, Tennessee.
World inventories are expected to climb to a 96.4 million bales in the 013/14 crop year end-July, as global output continues to outstrip demand, the USDA said.
Lighter-than-average trading volumes and the day's tight trading range were seen as evidence of the continued lack of investor interest in the fiber market.
Speculators hold only a small net short position in cotton contracts, according to the most recent U.S. government data, and market open interest has been languishing near low levels.
"It seems that the spec community did not participate in a large way, and it seems that today's report was discounted a great deal," said Dr. Louis W. Rose of Risk Analytics.
(Reporting by Chris Prentice; Editing by Bernard Orr)