HOUSTON (Reuters) - Hurricane Dolly strengthened on Wednesday as it neared southern Texas, and was expected to lash low-lying areas on the U.S.-Mexico border with winds of 100 mph (160 kph) and torrential rain when it comes ashore around mid-day.

The second hurricane of 2008 Atlantic storm season gathered strength over the warm waters of the Gulf of Mexico. The storm was now a Category 2 hurricane, the second level on the five-step Saffir-Simpson scale of hurricane intensity.

At 11 a.m. EDT, Dolly was about 30 miles east-northeast of the border town of Brownsville, Texas, where it was due to come ashore by mid-day. The storm was moving at about 7 mph (11 kph) toward shore, with the calm eye of the storm expected to cross the coastline in a few hours.

The storm's predicted landfall and strength were unlikely to threaten offshore drilling rigs and production platforms in the Gulf of Mexico. U.S. crude oil prices hit 6-week lows on Tuesday and fell further on Wednesday to below $126 a barrel.

The hurricane center issued a hurricane warning for the southern Texas coast as far north as Corpus Christi.

Category 3 to 5 storms are considered the most dangerous but a Category 2 hurricane is still capable of causing damage to poorly built dwellings such as mobile homes.

The seaport serving Corpus Christi, a major U.S. oil refining center, was closed to ship traffic as a precaution.

The NHC said Dolly could dump 15 inches of rain on low-lying areas in South Texas and northeastern Mexico in coming days.

That has spurred concerns that torrential rains could overcome levees holding back the Rio Grande River and cause widespread flooding.

Texas Gov. Rick Perry put 1,200 National Guard troops on alert and issued a disaster declaration for 14 low-lying counties. State officials said they would not order mandatory evacuations unless Dolly reached Category 3, with wind speeds of over 111 mph (178 kph).

Some 250 buses stood by in the inland city of San Antonio to evacuate coastal residents if needed.

FLOODING IS MAJOR CONCERN

In Cameron County near the Mexico border, officials expected up to 20 inches of rain. "That's going to do a number on our county," said Johnny Cavazos, the county's emergency management coordinator.

Levees holding back the Rio Grande could fail if Dolly drives a surge of water from the mouth of the river inland, Cavazos said.

The levees held under similar conditions during Hurricane Beulah in 1967, but have "seriously deteriorated" since then, he said.

Texas State Police Captain Joe Gonzalez, who heads the combined emergency management system in Brownsville, said he was confident the levees would hold.

A platoon of Texas National Guard troops had deployed to the populous, flood-prone Rio Grande Valley, Gonzalez said.

Officials late on Tuesday closed a causeway connecting Brownsville with the barrier island resort of South Padre Island. Many residents had already left.

In the Mexican city of Matamoros, across the border from Brownsville, police and military vehicles patrolled mostly deserted streets.

Authorities evacuated 23,000 people, but some were reluctant to leave, fearing looters.

"I didn't want to leave because I have been living in the same place for 40 years and I know what this is about," said Arturo Gutierrez, 55, a fisherman from the village of Chichonal who finally agreed to leave. "I am now going to the shelter because my wife forced me to."

The United States largely escaped the past two Atlantic hurricane seasons after being pummeled in 2004 and 2005, when a series of powerful hurricanes, including the catastrophic Katrina, ravaged Florida and the U.S. Gulf Coast.

The 2008 Atlantic hurricane season is already a month ahead of schedule. On average, the fourth tropical storm of the six-month season does not occur until August 29. Dolly, this year's fourth, formed on July 20.

(Additional reporting by Jim Forsyth in San Antonio, Michael Christie in Miami, Tomas Bravo in Matamoros, Mexico, and Mariano Castillo in Mexico City, editing by Alan Elsner and Frances Kerry)

(For latest U.S. National Hurricane Center reports, see http://www.nhc.noaa.gov/)

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