Oil prices fell about 3% on Wednesday as the U.S. dollar was set for its biggest one-day rise since March 2020 on Donald Trump's re-election as president.

Investors believe a Trump presidency will bolster the dollar as interest rates may need to remain high to combat inflation resulting from any new tariffs and policies that may further pressure China's economy, weakening demand there.

Brent crude oil futures were down $1.51, or 2%, at $74.02 per barrel by 1430 GMT. U.S. West Texas Intermediate (WTI) crude fell $1.62,or 2.3%, to $70.37. Both contracts lost over $2 earlier.

Independent analyst Tina Teng said that besides a surging dollar weighing on commodity prices, a Trump presidency could see policies that may further pressure the Chinese economy, weakening oil demand in the world's top crude importer.

The dollar was set for its biggest one-day rise since March 2020 against major peers as so-called "Trump trades" took off.

A stronger U.S. dollar makes greenback-denominated commodities such as oil more expensive for holders of other currencies and tends to weigh on prices.

"A Trump presidency has a bearish spin," UBS analyst Giovanni Staunovo said. "Tariffs would be negative for economic growth and oil demand growth."

However, Trump could renew sanctions on Iran and Venezuela, removing barrels from the market, which would be bullish, Staunovo added.

"He has little interest in renewables and will actively encourage U.S. oil production growth," said Panmure Liberum analyst Ashley Kelty.

"This is not so good for OPEC+ who will have to decide whether they want to protect market share or try to sustain price levels," Kelty said.

Weakening demand signals also weighed on oil on Wednesday, said Phillip Nova senior market analyst Priyanka Sachdeva in a note, after data from the American Petroleum Institute data showed U.S. crude inventories grew more than forecast.

U.S. crude oil stocks rose by 3.13 million barrels in the week ended Nov. 1, market sources said citing American Petroleum Institute figures, higher than a 1.1 million barrel build-up projected in a Reuters poll.

Meanwhile, oil and gas producers in the U.S. Gulf of Mexico began shutting output as Tropical Storm Rafael is forecast to become a Category 1 hurricane by early Wednesday.