Libyan rebels fled eastwards under heavy rocket fire from leader Muammar Gadafy's forces today in a sixth day of fighting for the oil port of Brega as diplomatic efforts to end the war remained stalled.
Sustained bombardments of rockets and mortars pushed the insurgent caravan of pick-up trucks and cars back towards their Benghazi stronghold, in the biggest retreat in several days of inconclusive battles.
With the rebel vehicles strung out in small groups, occasional rockets were still hitting the desert near the road 20km from Brega.
Earlier a Western air strike destroyed two of Col Gadafy's military vehicles in the east Libyan oil town, allowing rebels to edge forward.
The insurgents said Western air strikes had become less effective since Nato took control from a big power coalition of France, Britain and the United States last week.
The rebels had shown better organisation than in past weeks, keeping territory for longer and forcing untrained volunteers to stay back as more experienced forces attack Col Gadafy's front line troops.
The rebels had raced west to beyond Bin Jawad, about 525km east of Tripoli, backed by Western air strikes early last week, before Government troops mounted a counter-offensive.
The rebels were then pushed back, just as rapidly, more than 200 km into the eastern half of the country, before regrouping and holding their ground in Brega.
The frontline has been bogged down around Brega for nearly a week with Col Gadafy’s advantage in tanks and artillery cancelled out by Nato-led air strikes which effectively back the rebels.
Neither the rebels, nor Western powers will accept Libyan government offers to hold free elections and install a new constitution due to its insistence that Col Gadafy stay in power.
The rebels are to receive a boost with the loading of their first oil shipment due to begin today. The tanker Equator, which can carry a million barrels of crude, arrived at the eastern Libyan port of Marsa el Hariga, near Tobruk, satellite ship tracking data showed.
A full load would be worth more than $100 million, helping the rebel leadership to pay salaries and bolster its image as a potential government capable of taking over.
The rebel leadership says Qatar agreed to market oil from east Libyan fields no longer under Col Gadafy’s control after the Gulf state recognised the revolutionary council in Benghazi as Libya's legitimate government.
Italy, a major investor in Libyan oil, also sided with the rebels on Monday, promising them weapons and demanding that Col Gadafy and his family, who enjoyed warm ties with Italian prime minister Silvio Berlusconi, leave Libya.
"It rectifies a wrong," said Jalal el-Galal, a member of the rebel media committee in Benghazi. "Of course, Berlusconi is close to Col Gadafy, but that doesn't mean that Italy is. It is important that Italy should take this step because of our natural ties."
Diplomatic efforts to end the conflict appeared to be going nowhere. Government spokesman Mussa Ibrahim said Libya was ready for a "political solution" with world powers.
"We could have any political system, any changes: constitution, election, anything. But the leader has to lead this forward," he told reporters when asked about the content of negotiations with other countries.
Libyan deputy foreign minister Abdelati Obeidi ended a trip to Greece, Turkey and Malta to set out the government position with no breakthrough achieved.
Col Gadafy's British-educated son Seif al-Islam dismissed reports that his father's inner circle of advisers was crumbling following the defection of Foreign Minister Moussa Koussa.
He said "of course" there would be defections among senior members of the regime because some of them are old and tired and "not young like us."
He also dismissed the idea that Mr Koussa might have new information to offer British authorities about the Lockerbie bombing in which he was a key negotiator.
"The British and the Americans ... they know everything about Lockerbie so there are no secrets" Koussa can reveal, Seif said.
Turkey is expecting an envoy to visit from the opposition in the coming days and is listening to both sides.
"Both sides have a rigid stance," a Turkish Foreign Ministry official said after Mr Obeidi's visit. "One side, the opposition, is insisting that Col Gadafy should go. The other side is saying Col Gadafy should stay. So there is no breakthrough yet."
Maltese prime minister Lawrence Gonzi told the Libyan envoy yesterday that Col Gadafy and his family must relinquish power.
Mr Gonzi also expressed "disgust" with what was happening in Libya's third largest city Misrata, which is being pounded by Col Gadafy's forces. Witnesses have told of a "massacre" by Col Gadafy's forces in Misrata, the only major town in western Libya where the revolt that began seven weeks ago has not been crushed.
Some residents in the capital Tripoli, angered by fuel shortages and long queues for basic goods caused by a popular revolt and Western sanctions and air strikes, began openly predicting Col Gadafy's imminent downfall.
"People from the east will come here. Maybe in two weeks," said one entrepreneur who asked that his name not be used for fear of reprisals. "But now, people are afraid."