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The problem is that there are unnecessary space characters (or indentions).

Here is a working version:

import numpy as np
import cv2
cap = cv2.VideoCapture()
cap.open("http://192.168.1.104/")

while(True):
    # Capture frame-by-frame
    ret, frame = cap.read()

    # Our operations on the frame come here
    gray = cv2.cvtColor(frame, cv2.COLOR_BGR2GRAY)

    # Display the resulting frame
    cv2.imshow('frame',gray)
    if cv2.waitKey(1) & 0xFF == ord('q'):
          break

   # When everything done, release the capture
cap.release()
cv2.destroyAllWindows()