Oil slips more than $9 a barrel in 2-days

Oil prices extended a post-July 4th descent Tuesday - falling more than $9 a barrel over two days - as Iran's president downplayed concerns about possible war in the Middle East and investors anticipated falling demand due to high gasoline prices.

The price of light sweet crude for August delivery tumbled $5.33 to settle at $136.04 a barrel on the New York Mercantile Exchange. It was the lowest level in nearly two weeks, and followed a drop of $3.92 Monday.

Iran:Concerns over supply disruptions in the oil-rich Middle East eased after Iranian president Mahmoud Ahmadinejad said he did not believe there would be an armed conflict between Iran and Israel or the United States.

At a summit of Muslim nations in Malaysia on Tuesday, Ahmadinejad said he believed the United States and Israel have been using propaganda and psychology against Iran, but that he did not see war in the future, the Associated Press reported.

"A lot of tension baked-in over Iran...has dissipated," said Tom Orr, head of research at Weeden & Co. in Connecticut.

Demand predictions: Investors were concerned that a government report scheduled for release Wednesday may indicate there was lower demand for fuel over the Fourth of July weekend.

The government's petroleum inventory report is expected to show an increase in gasoline stocks, which are normally flat or lower over the holiday.