US oil prices dropped more than four percent Wednesday, hit by glum data on China's services sector and lowered forecasts for Asian growth.

Despite a fall in US crude stockpiles, which normally would push prices higher, New York-traded West Texas Intermediate crude for November delivery sank to $88.14 a barrel, a loss of 3.75 from Tuesday.

In London, Brent North Sea crude for delivery in November fell $3.40 to stand at $108.17 a barrel in late London deals.

Sellers piled in to the market after the purchasing managers index for China's services sector sank to its lowest level in nearly two years, echoing the dismal reading on its manufacturing PMI that showed the sector contracting a second straight month.

Both readings signaled a slowing Chinese economy unlikely to buy as much oil on world markets as has been expected.

In Europe, data on Wednesday showed eurozone private sector business activity remained firmly stuck in the doldrums in September, with the key services sector suffering a very sharp fall.

"The petroleum markets are under selling pressure in Wednesday trade on an apparent wave of long liquidation after China's service sector PMI disappointed and the Asian Development Bank cut its GDP growth forecast for emerging Asia," said Timothy Evans at Citi Futures.

"Money managers own too much oil. Prices can fall dramatically when they cut back on their risk positions," he said.

The fall in US inventories on the government's weekly supply report had little effect on the big picture, he said.

"We have very high inventories of crude oil, we have no shortage."