The price of oil fell to near $104 a barrel Thursday, extending a big drop the previous day sparked by weakness in China's economy.

By early afternoon in Europe, benchmark crude for September delivery was down 94 cents to $104.45 a barrel in electronic trading on the New York Mercantile Exchange. The contract dropped $1.84, or 1.7 percent, to close at $105.39 on Wednesday.

Oil fell despite a fourth straight weekly decline in U.S. crude inventories. But even with a drop of nearly 30 million barrels over the past month, the U.S. oil supply is 5 percent above its five-year average for this time of year, suggesting demand is still tepid.

An HSBC survey released Wednesday showed China's manufacturing at an 11-month low this month, indicating a deepening slowdown in the world's second-largest economy.

China's slowdown is in large part self-induced. Its leaders are trying to shift the basis of China's growth away from reliance on exports and industrial investment in favor of consumption which they hope will be more self-sustaining. That means large stimulus to boost the economy is unlikely and Chinese demand for oil is unlikely to grow at its earlier blistering rates.

"China has been and remains the key driver of global oil demand," analysts at Commerzbank in Frankfurt said in a report. "Weaker demand from China would thus cause the oversupply to increase even further. Financial investors clearly see this as an opportunity to grab profits, so the oil price is likely to remain under pressure for the time being."

Analysts also noted that oil prices seemed to be brushing off a series of encouraging economic data in Europe, including falling unemployment in Spain, solid 0.6 percent quarterly economic growth in Britain and an improving business climate in Germany.

"Investors, for now at least, are also brushing aside suggestions the European economy is finally coming out of recession," said Fawad Razaqzada, analyst at GFT Markets in London.

The Nymex contract broke above $100 on July 3 for the first time since May 2012 and analysts warned that despite the present decline, prices continued to be well supported.

"In view of the geopolitical tensions in the Middle East and North Africa, not to mention the associated risk of supply outages, any sharper fall in price is unlikely," Commerzbank said. "Continued destocking in the U.S. also argues against any more pronounced price slump.

Brent crude, which is traded on the ICE exchange in London, was down 44 cents to $106.75 a barrel.

In other energy futures trading on Nymex:

— Wholesale gasoline shed 4 cents to $2.9819 a gallon.

— Heating oil lost 3.48 cents to $3.016 a gallon.

— Natural gas retreated 0.1 cent to $3.697 per 1,000 cubic feet.