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ICE cotton rises 2% as market weighs trade talks

July 19 (Reuters) - ICE cotton futures rose more than 2% on Friday as some investors bought the natural fiber after prices hit three-year lows in the previous session, on hopes that a resolution in U.S.-China trade talks would help the market battle demand woes.

* The most-active cotton contract on ICE Futures U.S., the

second-month December contract , settled up 1.36

cent, or 2.20%, at 63.07 cents per lb. Prices registered their biggest one-day percentage gain since Feb 21.

* Second month contract touched 61.66 cents, the lowest since May 2016 on Thursday.

* Traders pondered whether a call on Thursday between senior U.S. and Chinese officials would herald progress in ending a trade dispute that has stalled U.S. agricultural exports, including cotton.

* "There is hope of some more Chinese sales down the road and cotton is cheap. The weather forecast in India is not very good. We expect prices will rebound and run some short speculators out of the market," said Rogers Varner, president of Varner Brokerage in Cleveland, Mississippi.

* Lack of demand, as well as the long-drawn, tit-for-tat tariff war between the United States and China, have pushed cotton prices down more than 14% so far this year.

* Traders also noted that ICE certificated stocks <CERT-COT-STX> have dipped below 50,000 bales.

* The stock levels demonstrate that the supply of fiber of a high enough grade to be deliverable on the exchange is falling and could support prices, traders said.

* "ICE futures should experience resistance near 64.50 65.50, over the near- to medium-term. Relatively strong support likely resides near 61.00 61.50," Louis Rose, director of research and analytics at Tennessee-based Rose Commodity Group, said in a note.

* Total futures market volume rose by 3,075 to 21,768 lots. Data showed total open interest gained 2,454 to 195,421 contracts in the previous session.

* Speculators trimmed net short positions by 582 contracts to 48,108 in week to July 16, according to the U.S. Commodity Futures Trading Commission (CFTC) report.

(Reporting by Nallur Sethuraman in Bengaluru; Editing by Dan Grebler)