ICE cotton futures eked out gains on Monday as traders covered short positions and snapped up fibre after last week's drop to six-week lows. The most-active July futures contract on ICE Futures US settled 0.93 percent higher at 86.15 cents per lb. While the gains brought an end to two days of losses, prices were still languishing close to six-week lows around 85 cents hit last week.
"We've been testing (85 cents) for about a week. Anyone short is coming in to cover around this level, and we'll see some commercial buying right here," said Sterling Smith, a futures specialist with Citigroup in Chicago. Fibre outperformed the broader commodity market. The 19-commodity Thomson Reuters-Jefferies CRB index ended the day down 0.14 percent as gains in gold and oil were offset by weaker base metals and grains markets.
Prices sank to six-week lows last week as speculators have started locking in profits after piling into cotton in the market's longest bull run in two years. Since prices peaked at 94 cents last month, traders have been unwinding their largest net long position in five years.
For a third straight week they cut their net bullish bets, by 11,143 contracts to 51,516 in the week to May 16. That was the lowest level since January 22 when the rally started. Reflecting the extent of the selloff, open interest has also fallen to its smallest since mid-January. Prices are still up 15 percent since the start of the year.