Brent below $87 on strong dollar; U.S. GDP boosts rate outlook

* Brent, U.S. crude down about 1 percent each

* Dollar at 3-week high on bets of faster-than-expected rate hike

* U.S. GDP advances up 3.5 pct in Q3, consensus was 3 pct rise (Recasts and updates prices, analyst views to U.S. session; changes byline and dateline, previously LON)

By Barani Krishnan

NEW YORK, Oct 30 (Reuters) - Oil prices fell about 1 percent on Thursday, resuming their downtrend after a two-day climb, as the dollar surged on bets of a sooner-than-expected U.S. interest rate hike and traders appeared resigned that producer group OPEC won't do much to cut output next month.

Both benchmark Brent and U.S. crude gained about 1 percent a day earlier as U.S. crude stockpiles rose less than expected last week, ending two weeks of builds that pressured the market.

But sentiment in oil weakened again in the latest session as the dollar hit a three-week high after the Federal Reserve ended its long-running bond-buying stimulus on Wednesday. A stronger dollar makes commodities priced in the currency, including oil, costlier for buyers using other denomination.

A 3.5 percent annual rise in third-quarter U.S. gross domestic product reported on Thursday also reinforced investor confidence over the economy, lending to a more hawkish interest rate outlook.

"We're back to the mantra that the U.S. economy will lead the way to higher rates from hereon, and that's causing dollar to really weigh on oil and all commodities," said Phil Flynn, analyst at Price Futures Group in Chicago.

Brent crude for December delivery fell 65 cents a barrel to $86.47 by 1606 GMT, after falling to as low as $86.11. Front-month U.S. crude was down $1.10 to $81.10, after a session low at $80.80.

Aside from rate hike worries, oil traders were also wary of recent remarks by OPEC officials, including those of producer Iran, that the Nov. 27 meeting of the cartel may not help much to reduce what many feared was higher than necessary production.

A 25 percent slide in oil prices since June had raised talk that the Organization of the Petroleum Exporting Countries may need to curb output.

But OPEC secretary general Abdullah al-Badri said on Wednesday the exporter group wasn't in a rush to trim production.

Earlier this week, a senior Iranian oil official said a cut was unlikely at the November meeting. Iran is normally the first among OPEC members to call for action to support oil prices.

"So when you have them saying they don't think there's going to be a cut, I think the decision is pretty much made," said James Williams, energy economist at WTRG Economics in London, Arkansas.

(Additional reporting by Christopher Johnson in London and Manolo Serapio Jr in Singapore; Editing by Dale Hudson, David Clarke and Meredith Mazzilli)