NEW YORK, April 11 (Reuters) - U.S. cotton futures
rebounded to a firm close Monday on investor short-covering as
fiber contracts recouped the losses posted late last week,
analysts said.

The key May cotton contract on ICE Futures U.S.
gained 1.61 cents to settle at $2.0458 per lb, trading from
$1.9935 to $2.0773. The new-crop December cotton contract
went up 1.10 cents to close at $1.3918.

Total volume traded in the cotton market was around 26,100
lots, about 5 percent above the 30-day norm, Thomson Reuters
preliminary data showed.

Analysts said the market received support from a government
report last week showing that U.S. cotton ending stocks were
at their lowest level since the 1930s.

'It's got such strong fundamentals underneath it,' Mike
Stevens, an independent analyst from Louisiana, said of the
new-crop December cotton contract.

Near-term, the market is facing overhead resistance because
prices have sprinted to such a high level that some mills are
balking at picking up cotton supplies at this level, Penson
Futures senior cotton analyst Sharon Johnson said.

Open interest in the cotton market stood at 198,203 lots as
of April 8, just shy of the 2-month peak at 200,051 lots, which
is the highest since Feb. 10, data from ICE Futures U.S.
showed. (Graphic: http://link.reuters.com/peb98r )

Some traders believe part of the rise in cotton open
interest was caused by an increase in short positions in the
market, but others believe there is an equal split in the
buildup of both short and long positions in cotton.

'There are investors who believe that cotton supplies will
remain tight into 2012 so you should expect investors to go
into the long side of cotton. But a price above $2 means demand
destruction so short-term players could play this market short
as well. That's why it is so hard to read anything definite in
this increase in open interest,' one dealer explained.

The market has already digested the USDA's estimate of U.S.
cotton sowings and players are keeping an eye on the near
drought conditions in the top growing area of Texas, which is
expected to plant about half of the U.S. cotton crop.