Libyan tanks fired on rebel positions around the oil port of Ras Lanuf and warplanes hit another oil hub further east on Thursday as Muammar Gaddafi carried counter-attacks deeper into the insurgent heartland.
In the west, Gaddafi's army laid siege to try to starve out insurgents clinging to parts of the shattered city of Zawiyah, strategically significant because it is close to his powerbase in the capital Tripoli, after fierce see-saw battles this week.
But the rebels took an important step toward international legitimacy when France recognized their national council.
While oil prices have been kept high by the bombardments in the east of the Arab North African state, there was no clear sign of deliberate intent by Gaddafi to ruin oil infrastructure.
NATO and the European Union were looking into imposing a "no-fly" zone over Libya to stop the government using jets and helicopters against the outgunned rebels, who seized a string of cities east and west of Tripoli early in the three-week-old war to end Gaddafi's 41 years of iron-fisted rule.
Despite rebel appeals to take the skies away from Gaddafi's forces, no quick action was expected as NATO has made clear it needs wider, United Nations endorsement for such a move.
More than 500 km (300 miles) east of Tripoli, Gaddafi's warplanes and gunboats off the Mediterranean coast bombarded rebels around Ras Lanuf, with projectiles crashing close to a building of the Libyan Emirates Oil Refinery Company.
There was a series of air strikes, and insurgents fired anti-aircraft guns toward warplanes and rockets out to sea toward Gaddafi's naval forces, without visible effect.
Two rebel fighters said they saw Ras Lanuf's residential area, including the vicinity of its hospital, get bombed and that government forces had fired rockets from sea, air and ground. There was no apparent damage to the hospital.
Later, at least two tanks were seen bearing down on ragged rebel lines outside Ras Lanuf and opening fire.
The rebels also reported an air strike on Brega, another oil port 90 km (50 miles) east of Ras Lanuf, indicating that Gaddafi loyalists had not only halted a westwards insurgent push in its tracks but were making inroads into the rebels' eastern centers.
State television said rebels had been ousted from the port and airport of Es Sider, a further oil terminus about 40 km (25 miles) up the coast west of Ras Lanuf.
OPEC member Libya was turning away tankers from ports as storage depots dried up because of supply disruptions caused by the fighting. Libya's oil trade has virtually been paralyzed as banks refuse to clear payments in dollars due to US sanctions, cutting off major importers such as Italy and France.
The intensified fighting near oil installations kept crude prices hovering near recent 2.5-year highs, with Brent crude trading at $114.55 a barrel.
Fading rebel fortunes?
The rebels, hitherto bursting with confidence that they would soon charge hundreds of km (miles) up the Mediterranean desert coast, overwhelming any resistance, to capture Gaddafi's main bastion Tripoli, now conceded they were struggling to hold ground against the government's vastly superior firepower.
"(Gaddafi) might take it. With planes, tanks, mortars and rockets, he might take it," said rebel fighter Basim Khaled.
"A no-fly zone would be great," said rebel fighter Salem al-Burqy, echoing the view of many beleaguered cohorts.
Gaddafi's counter-offensive has stymied a rebel advance from their eastern power base of Benghazi. They were forced to withdraw from the front-line town of Bin Jawad, just west of Ras Lanuf, after coming under heavy shelling earlier this week.
One fighter said rebels had retaken the heart of Zawiyah, the closest city -- 50 km (30 miles) west -- to Tripoli, from the army overnight. Zawiyah's center appeared to change hands twice during the day in a fierce battle.
"We fought until after three in the morning. It's all quiet here this morning," said the insurgent, named Ibrahim, by phone.
Mohamed, a Libyan in exile abroad who got through to a relative on the outskirts of Zawiyah on Thursday morning, said it was simply not clear who was winning the battle for the city but the army had it under siege to break the rebels' will.
"Yesterday (rebel sympathizers) tried to bring food and medicine from Subratha but failed. Government troops surround Zawiyah from everywhere. It is unclear who controls the center. It changes all the time. It's street to street fighting."
Authorities have kept journalists away from Zawiyah.
France became the first significant country on Thursday to recognize the rebel Libyan National Council as the legitimate representative of the Libyan people.
An official at President Nicolas Sarkozy's office said France would send an ambassador to Benghazi and receive a Libyan envoy in Paris. He was speaking after Sarkozy met officials from the Libyan National Council.
Britain's Foreign Office suggested it could make the same opening as France, saying Libyan National Council members were "valid interlocutors" and Gaddafi should step down now. "The UK recognizes states, not governments. The interim national council are valid interlocutors, with whom we wish to work closely," a Foreign Office spokesman said.
The US Defense Department said it was preparing a "full range" of military options for Libya, including a no-fly zone. NATO ministers were to weigh up options at talks in Brussels on Thursday. Military officers said a zone could be set up quickly.
Rebel forces have appealed to Washington and its allies to impose a no-fly zone to deny Gaddafi's forces the advantage of using warplanes and prevent him moving troops by helicopter.
A no-fly zone could also help protect civilians who have been caught in the fighting, with scores if not more people reported killed so far in cities like Zawiyah. A burgeoning humanitarian emergency could hasten a no-fly decision.
Call to avoid shooting at civilians
In Geneva, the International Committee of the Red Cross said Libya had descended into civil war with increasing numbers of wounded civilians arriving in hospitals in the east.
ICRC President Jakob Kellenberger called on Libyan authorities to grant the humanitarian agency access to western areas including the capital Tripoli and reminded both sides that civilians and medical facilities must not be targeted.
General Raymond Odierno, commander of the US Joint Forces Command, said the US military was probably capable of establishing a "no-fly" zone over Libya "within a couple of days" if the international community so decided.
US Secretary of State Hillary Clinton has made it clear imposing a no-fly zone is a matter for the United Nations and should not be a US-led initiative. Russia and China, permanent members of the UN Security Council, oppose the idea, which could entail bombing Libyan air defenses as a first step.
Russia said on Thursday military intervention would be unacceptable, but acted to help isolate Gaddafi by banning all weapons sales to Libya, effectively suspending major arms contracts with his government.
Italy, whose bases could play a critical role in any military action, has said it will back any decisions taken by NATO, the EU or the United Nations, clearing the way for US naval forces based in Naples to be deployed if needed.
Two members of Libya's opposition council visited the European Parliament on Wednesday and said they wanted EU moral support, political recognition and a no-fly zone shielding the territory they hold -- but not any form of military intervention in a country sensitive about former colonial domination.
Counter-attacks by Gaddafi loyalists suggest the flamboyant leader, in power since a 1969 coup, will not go as quietly or quickly as fellow leaders in Egypt and Tunisia did in a tide of popular unrest rolling across the Arab world.