Tropical Storm Dolly strengthens slightly

NEW YORK (Reuters) - Tropical Storm Dolly continued to strengthen slightly early Tuesday as it moved over the warm waters of the western Gulf of Mexico towards the Texas-Mexico border, the U.S. National Hurricane Center said in its latest update.

NHC said Dolly was still expected to become a hurricane before making landfall in the next 24 to 36 hours.

Weather models show the storm moving across the western Gulf, making landfall somewhere near the Texas-Mexico coast on Wednesday.

A hurricane warning was in effect for the Texas coast from Brownsville northward to Port O'Connor and for the northeast coast of Mexico, meaning a hurricane is expected to hit that area within the next 24 hours.

Dolly was located about 265 miles southeast of Brownsville, Texas, moving west-northwest at about 13 miles per hour. A decrease in forward speed was expected today followed by a turn to the northwest on Wednesday.

Maximum sustained winds were up to 65 mph, and additional strengthening was forecast, with Dolly expected to become a hurricane before landfall.

Energy traders watch for storms that could enter the Gulf of Mexico and threaten U.S. oil and gas production facilities, but the projected track of Dolly looked too far south to disrupt offshore output.

Commodities traders also watch storms that could hit agriculture crops like cotton in Texas and citrus in Florida.

The NHC was also monitoring a large and well-defined tropical wave located in the far eastern Atlantic Ocean near the Cape Verde Islands. Although this system will be traversing cool waters, it still has some potential for tropical cyclone formation as it moves generally westward over the next couple of days.

Elsewhere, tropical cyclone formation is not expected during the next 48 hours.

The next NHC advisory will be issued at 11 a.m. EDT (1500 GMT).

(Reporting by Joe Silha, editing by John Picinich)