* U.S. railroad strike averted by late-night deal

* IEA says oil demand growth to stop growing in Q4

* U.S. commercial crude stockpiles rise again on SPR releases -EIA

* Strong dollar weighs as Fed decision looms over broader markets

* Armenia-Azerbaijan clashes lend support - analyst (Updates prices, adds U.S. railroad strike deal details)

By Alex Lawler

LONDON, Sept 15 (Reuters) - Brent crude oil fell 3% on Thursday as expectations of weaker demand and a strong U.S. dollar ahead of a potentially large interest rate increase outweighed supply concerns.

The International Energy Agency said this week oil demand growth would grind to a halt in the fourth quarter. The dollar held near recent peaks, supported by expectations the U.S. Federal Reserve will continue to tighten policy.

Brent crude was down $2.72, or 2.9%, to $91.38 a barrel at 1342 GMT. U.S. West Texas Intermediate crude fell $1.63, or 1.8%, to $86.85.

"There are many forces dictating the price action in oil markets right now, with economic uncertainty right up there," said Craig Erlam of brokerage OANDA. "The stronger dollar is potentially another headwind."

Oil also dropped after a late-night deal to avert a U.S. railroad strike, that could have hit food and fuel supplies. The prospect of a strike lent the market some support on Wednesday.

Crude has dropped substantially after a surge close to its all-time highs in March after Russia's invasion of Ukraine added to supply concerns, pressured by the prospects of recession and weaker demand.

New clashes between Armenia and Azerbaijan, an oil producer, linked to a decades-old dispute between the ex-Soviet states raised another risk to supplies, although a senior Armenian official said on Wednesday a truce had been agreed.

"Whilst challenging the $100 hurdle is currently not a dead cert it seems that a bottom at around $90 has been found basis Brent, largely thanks to war-related supply fears," said Tamas Varga of oil broker PVM.

Oil came under pressure from a strong dollar, which makes dollar-denominated commodities more expensive for other currency holders, ahead of a Federal Reserve meeting next week that could hike interest rates by a jumbo 100 basis points.

U.S. crude inventories rose by a more than expected 2.4 million barrels, although they were again boosted by the ongoing releases from the Strategic Petroleum Reserve, part of a programme scheduled to end next month. (Additional reporting by Muyu Xu; Editing by Mark Potter and Kirsten Donovan)