NEW YORK, Oct 5 (Reuters) - Cotton futures closed higher Wednesday for
the third straight session on trade and speculative buying as the market
was inspired by the recovery in the commodity sector, analysts said.

The key December cotton contract on ICE Futures U.S. added 0.43
cent to end at $1.023 per lb, trading from $1.0127 to $1.03. It was an
inside day since the range was within Tuesday's 98.65 cents to $1.0321
band.

The market has been pinned in a range from 98 cents to $1.0321 over the
past seven sessions.

Total volume traded Wednesday hit almost 8,300 lots, around one-third
below the 30-day norm, preliminary Thomson Reuters data showed.

'We've been holding (our gains),' said Sharon Johnson, senior cotton
analyst at commodities brokerage Penson Futures in Atlanta, Georgia.

Traders said if the December cotton contract can finish above the
50-day moving average at $1.0445 and then move through layers of resistance
all the way up to the $1.09 level, the market may have enough momentum to
go over $1.10 and then possibly the $1.15 a lb level.

Cotton futures were aided in its advance by the rebound which hoisted
the commodity sector higher.

Global stocks and oil prices rebounded on hopeful signs that
authorities are moving forward to prop up Europe's ailing banking sector
and reassuring U.S. economic data.

Johnson and other traders said that even though cotton prices are
currently above $1 a lb, mill demand seems to be present when it goes down
to 98 cents.

There are also concerns that cotton supplies in both the U.S. and
Pakistan which have been affected by drought and floods respectively, may
be even smaller than initially thought, analysts said.

Open interest in cotton, usually taken as an indicator of investor
exposure in cotton, stood at 151,858 lots as of Oct 4, from 150,881 lots on
Oct 3, the exchange said.

Total volume traded Tuesday in the cotton market reached 23,740 lots,
versus the previous session's count at 17,773 lots, ICE Futures U.S. data
showed.