NEW YORK -- Oil prices dropped slightly on Thursday on disappointing manufacturing data from China.

China's manufacturing activity in May contracted for the first time since last October, a preliminary survey from the HSBC showed. China is the second largest oil consumption nation in the world.

The HSBC Flash Manufacturing Purchasing Managers' Index (PMI) for May slipped to 49.6, under the boom-bust line of 50.

China is facing rising downward risks in the second quarter, said Qu Hongbin, chief economist of HSBC China.

In the United States, the advance figure for seasonally- adjusted initial jobless claims was 340,000 in the week ending May 18, a decrease of 23,000 from the previous week's revised figure of 363,000, the Labor Department said.

And the U.S. Manufacturing Purchasing Managers' Index fell to 51.9 in May, the lowest reading since last October, financial information services company Markit reported on Thursday.

Oil prices pared early losses as the U.S. dollar retreated against other major currencies. The dollar slumped versus the Japanese yen on fears that the U.S. Federal Reserve may wind down its stimulus measures soon. A weaker greenback made the dollar- denominated oil more appealing as an investment.

Light, sweet crude for July delivery lost 3 cents to settle at 94.25 dollars a barrel on the New York Mercantile Exchange.

Brent for July delivery went down 16 cents, or 0.15 percent, to close at 102.44 dollars a barrel.