(Updates storm strength, position)

By John Marino

SAN JUAN, Oct 15 (Reuters) - Hurricane Omar strengthened rapidly on Wednesday as it raced toward Puerto Rico and the small islands of the northeastern Caribbean, threatening to bring torrential rains that could trigger dangerous floods and mudslides.

The 15th tropical cyclone of a busy Atlantic hurricane season, Omar formed north of the Dutch island of Curacao on Tuesday, disrupted oil operations in Venezuela and shut down processing units at a refinery in the U.S. Virgin Islands.

Omar became a Category 2 storm on the five-step Saffir-Simpson scale of hurricane intensity with sustained winds of 105 miles per hour (170 km per hour) as it headed for the Virgin Islands, where it was expected to strike early on Thursday, the hurricane center said.

"Additional strengthening is forecast during the next 24 hours and Omar is expected to be a strong Category 2 hurricane by the time it reaches the northern Leeward Islands," the hurricane center said.

In the U.S. territory of Puerto Rico, home to about 4 million people, schools, government offices and most businesses shut down. The seaside Capitol building was empty by early afternoon and a usually bustling shopping center was secured with hurricane shutters.

Residents flocked to supermarkets to stock up on drinking water, canned goods and other supplies.

"I'm not too worried, but I went out and bought water, candles and gas," San Juan resident Kevin Mead, 35, said. "I paid with my bank card. I'm keeping my cash."

Local National Weather Service director Israel Matos said there were fears the storm would affect the same areas hardest hit by heavy rains three weeks ago, when 30 inches (76 cm) of rain caused severe flooding.

"The ground is saturated, which increases the possibility of flooding and mudslides," he said.

On the island of Vieques, which was smacked by hurricanes Hugo in 1989 and Georges in 1998, residents rushed to board up houses and fill their cars with gasoline.

By 8 p.m. EDT/0000 GMT, Omar was located about 80 miles (130 km) south-southwest of St. Croix and 130 miles (210 km) south-southeast of San Juan and was moving to the northeast at 17 mph (27 kph), the hurricane center said.

TROPICAL DOWNPOUR

Omar brought heavy rains to the Netherlands Antilles islands, and parts of Venezuela and Colombia, and could douse Puerto Rico and the northern Leeward Islands with up to 20 inches (51 cm) of rain, the hurricane center said.

Storm alerts were posted a wide area of the northern Caribbean from Puerto Rico to Guadeloupe.

The storm briefly prevented Venezuela from loading tankers with crude oil and knocked out power at the OPEC nation's 200,000 barrel-per-day Puerto La Cruz refinery.

Processing units at the 500,000 barrel-per-day Hovensa refinery on St. Croix in the U.S. Virgin Islands were being shut down ahead of Omar's arrival, Hess Corp <HES.N> said.

Hovensa is a large supplier of gasoline and heating oil to U.S. East Coast markets.

A tropical depression moved inland over Honduras but did not strengthen enough to become Tropical Storm Paloma.

Forecasters said the storm had sustained 35 mph (56 kph) winds and would weaken gradually, but it could bring up to 15 inches (38 cm) of rain, which could trigger floods.

The depression did not present a threat to the U.S. mainland or Gulf of Mexico oil fields.

The 2008 hurricane season, which officially ends on Nov. 30, has been active. An average season spawns 10 storms, of which six become hurricanes.

This year, Hurricane Gustav hit near New Orleans, the city devastated by Hurricane Katrina in 2005, and Hurricane Ike hit Houston. Both threatened oil rigs off the U.S. Gulf Coast, which supply a quarter of U.S. domestic oil.

In Haiti, more than 800 people were killed in flooding caused by Fay, Gustav, Hanna and Ike, while Cuba suffered $5 billion in damage after being raked by Gustav and Ike. (Additional reporting by Tom Brown in Miami, Janet McGurty in New York and Irasi Jimenez in Willemstad, Curacao, Writing by Michael Christie, Editing by Jim Loney)

AlertNet news is provided by