NEW YORK, Dec 17 (Reuters) - U.S. cotton futures rose
nearly 3 percent to settle at a one-month peak and near record
highs on Friday as speculators plowed into the market on the
notion it had run out of new supply in the near-term.

'Basically, the projection is that there's very little
cotton, if any, to be delivered into the March contract,' said
Mike Stevens, an independent cotton analyst in Mandeville,
Louisiana.

'It's not a new story, but one that is driving this market
until we find a way to ration or reduce the demand.'

But some think cotton could actually fall in the coming
week, ending a three-week run-up, if investors decide to take
profit ahead of Friday's pre-Christmas holiday.

'Next week is a short week ... longs may decide to cash
in,' said Sharon Johnson, senior cotton analyst at commodity
brokers Penson Futures in Atlanta, Georgia.

The key March cotton contract on ICE Futures U.S.
settled up 4.0 cents, or 2.7 percent, at $1.5012 per lb. That
took the market to its highest level since Nov. 10, when it hit
a record peak of $1.5195.

Cotton has been the best performing commodity in the
Reuters-Jefferies commodity index, up over 80 percent year to
date. (Graphic: http://link.reuters.com/kew48n)

For this week, March cotton was up 10 percent, extending
its 22 percent gain from two previous weeks.

If supply fears continue, cotton could rally to a new
record above $1.60 a lb with some intermittent profit-taking,
independent analyst Stevens said.

'I'm shooting darts in the dark here, but this is very
possible,' he said. 'You're talking about a market that's
doubled in price over the last six months.