Oil edged higher towards $63 a barrel on Tuesday after Iran warned it could use its oil exports as a weapon following the U.N. Security Council's decision to impose sanctions on its trade in nuclear goods.

U.S. crude gained 19 cents to $62.60 a barrel by 1454 GMT. Brent crude rose 37 cents to $62.79.

Public holidays across Europe meant trading volumes were very thin.

After months of deadlock, the Security Council agreed on Saturday to impose sanctions on Iran's trade in nuclear materials and technology, drawing a warning from Tehran.

"If necessary, Iran will use any weapon to defend itself," Oil Minister Kazem Vaziri-Hamaneh was quoted as saying by the semi-official Fars news agency on Tuesday. In the past he has said Iran would rather not play the oil card.

Iran, the world's fourth-largest crude producer, has condemned the U.N. resolution as illegal and on Sunday vowed to speed up enrichment work, which could heighten tensions.

Oil prices rose earlier in the year in response to fears Iran might cut its oil exports or disrupt Gulf shipping as its row with the West over its nuclear programme escalated. The issue had faded since summer as the U.N. appeared unable to agree on how to deal with Tehran.

Some analysts said traders might disregard the latest developments unless they saw evidence of supply disruption.

"It is certainly a bullish factor, but I think geopolitical matters will be ignored unless clearer risks materialise," said Makoto Takeda, energy analyst at Bansei Securities Co.

OPEC CUTS

Prices also drew support after Abu Dhabi's state oil firm, the main producer in the United Arab Emirates, said it would cut exports of nearly half its crude grades by 3-5 percent in February.

The statement was the first sign the Organization of the Petroleum Exporting Countries intended to comply with a second round of output reductions agreed this month.

The new 500,000 barrels per day cuts are scheduled to take effect in February, giving the producer group time to assess whether peak winter demand will be enough to reduce swollen consumer inventories.

Unusually warm weather in the United States has curbed fuel demand and helped to drag prices just over $1 lower last week.

DTN Meteorlogix said on Monday temperatures in the U.S. Northeast had averaged 10-16 degrees Fahrenheit (5-8 Centigrade) above normal over the long Christmas holiday weekend. But conditions were set to grow colder, nearing normal by Saturday.

Given growing geopolitical risks and the start of a new year, some analysts predicted a new flow of investment-class money could further fuel any rally.

"We expect another influx of financial money into oil in the coming weeks, and geopolitical threats, such as Iran and Nigeria, remain active," said Mike Wittner, head of energy market research at Calyon Corporate and Investment Bank.