Tropical Storm Carlotta strengthened off Mexico's Pacific coast on Thursday and was expected to become a hurricane on Friday, the US National Hurricane Centre said.
Carlotta, the third named storm of the Pacific hurricane season, is set to graze the coastline south of tourist city Acapulco and pass north of Mexico's largest oil refinery.
State oil company Pemex said it was monitoring the storm and the 330,000 barrel-per-day refinery was operating normally on Thursday.
Carlotta's path is far from the Baja California resort of Los Cabos where world leaders are set convene for the Group of 20 leaders of major economies on Monday and Tuesday.
With maximum sustained winds of almost 65 mph, Carlotta was 460 miles southeast of Acapulco and moving northwest at 10 mph, the Miami-based hurricane centre said.
The Mexican government issued a hurricane watch from east of Salina Cruz to Barra de Tonala, and west of Punta Maldonado to Acapulco.
The storm could dump up to 12 inches of rain in the affected areas and cause dangerous storm surges, the hurricane centre said. "These rains could cause life-threatening flash floods and mudslides," it said.
Authorities in the Baja California peninsula preparing for the G20 summit said the airport in Los Cabos, expecting an influx of delegations from around the world, was still open.
"We are following developments, but at the moment there is no alert," said Salvador Banaga, head of Los Cabos' emergency services. "We are expecting the biggest impact to be in the southeast part of the country. Up here, it won't be that bad."
In 2002, Hurricane Kenna hit south of Los Cabos while the city was hosting an international meeting of the 21-member Asia Pacific Economic Cooperation group. Strong winds from Kenna knocked over the main tent at the event where world leaders were set to attend a gala dinner, although no one was injured.
Kenna hit land 300 miles south of Los Cabos in 2002. Carlotta is expected to strike the coast more than twice as far away.