Forces loyal to Libyan leader Moamer Kadhafi launched air strikes on rebel positions as the United States said that any no-fly zone over the country would need to have full UN backing.
US President Barack Obama and British Prime Minister David Cameron said they would plan a "full spectrum" of action against Kadhafi while US officials met with opposition members seeking to topple the veteran leader.
Cameron said the world could not stand aside while Kadhafi did "terrible things" to the Libyan people. "We have got to prepare for what we might have to do if he goes on brutalising his own people," Cameron said.
As fighting raged, a rebel spokesman said a Kadhafi intermediary had offered talks but was rejected outright.
That claim was dismissed as "rubbish" by a government official in Tripoli, where a defiant Kadhafi made a late-night appearance at a hotel used by many foreign correspondents in the Libyan capital.
Heavy shelling was heard on the front line with the rebel-held east.
Rebels said government troops had unleashed a torrent of fire west of the rebel-held oil town of Ras Lanuf, and dozens of opposition fighters were seen moving up the desert road.
An AFP reporter said that at one point, he counted 10 shells in two minutes.
The rebels, who control most of eastern Libya, have found their advance checked as their rebellion against Kadhafi's more than 41-year-old rule entered a fourth week.
Their goal of marching to Tripoli has stalled since the weekend when the regime recaptured Bin Jawad, a hamlet 15 kilometres (10 miles) west of Ras Lanuf, and numbers at the front appear to have decreased.
But the ragtag rebels were still moving forward near Ras Lanuf from their strongholds in the east, many carrying AK-47s assault rifles or rocket propelled grenade launchers (RPGs).
"We came here with Kalashnikovs, we don't have any tanks or anything. But they are shooting at us with bombs and rockets," said Ayman Bursi, a bearded fighter wearing a green sweater and camouflage trousers.
Another man, wearing an old-style flying helmet and with an RPG launcher slung over his shoulder, shouted: "Victory, victory, we will not surrender. This is the price of freedom."
Saad Hamid, a "media official" for the rebel national council, said government forces had been seen digging trenches and had brought up rocket launchers, tanks and artillery, as well as intensifying air strikes.
"We now have reinforcements on the way and they are also making preparations," he told AFP.
Earlier, warplanes staged a series of raids on Ras Lanuf, wounding one person.
A former official said Kadhafi's forces have launched a final onslaught on the western city of Zawiyah and described the situation there as "very critical".
"Round every corner there are people shooting. He (Kadhafi) wants to take it before Wednesday. The international community must do something," Murad Hemayma said of the strategic city, besieged for days by Kadhafi tanks and troops.
As pressure grew from inside Libya and elsewhere in the Arab world for a no-fly zone, the White House said Obama and Cameron agreed to press forward with planning, including at NATO, on a range of possible responses.
Measures under consideration included surveillance, humanitarian assistance, enforcement of the arms embargo and a no-fly zone, the White House said.
Washington has been markedly less enthusiastic about the possibility of such a step than some of its allies, with some officials noting that it would likely require bombardment of Libya's air defences.
Showing continued US caution about a no-fly zone, Secretary of State Hillary Clinton said that any decision to impose such a measure to protect civilians from Kadhafi's air power should be taken by the United Nations and "not the United States".
"I think it's very important that it's not a US-led effort because this comes from the people of Libya themselves," Clinton told Sky News. "We think it is important that the United Nations make that decision."
Britain and France have been drawing up a draft UN Security Council resolution on a no-fly zone and a senior UN official in New York said the council had discussed the matter.
The rebel leadership went to the European Parliament with a demand to be recognised as "legitimate" and a request for the West to impose a no-fly zone.
In Cairo, US ambassador to Libya Gene Cretz and other US officials met members of the opposition seeking to topple Kadhafi, the State Department said.
"We are engaging a wide range of leaders, and those who both understand and can potentially influence events in Libya," State Department spokesman Philip Crowley told reporters, without elaborating.
He declined to identify who Cretz had met but said Washington has been in contact with opposition members inside and outside the national council, which is headed by former Libyan justice minister Mustafa Abdel Jalil.
In Yemen, which has seen lower levels of unrest than the popular uprisings that engulfed Tunisia and Egypt before Libya, police opened fire on protesters attempting to expand a camp in the capital Sanaa, wounding at least four people.
The police fired both tear gas and live rounds in an effort to prevent the protesters against President Ali Abdullah Saleh's three-decade rule expanding the camp they have set up in a square in the capital.
Oil, which has hit two-and-a-half-year highs since unrest in the Arab world erupted in December, eased slightly after major supplier Saudi Arabia said it would counter any shortfall and on reports that Kadhafi was seeking an exit.
New York's main contract, light sweet crude for delivery in April, shed 39 cents to $104.63 per barrel while Brent North Sea crude for April delivery fell 36 cents to $112.70.
by Danny Kemp
(c) 2011 AFP
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