Libyan rebels prepared for further attacks by forces loyal to leader Muammar Gaddafi on Friday as both sides struggled for control of a strategic coastal road and oil industry facilities.
US President Barack Obama said he was concerned a bloody stalemate could develop between Gaddafi and rebel forces but gave no sign of a willingness to intervene militarily.
"Muammar Gaddafi has lost the legitimacy to lead and he must leave," Obama said, the first time he has called in public for Gaddafi to leave Libya, although he has urged his exit in written statements by the White House.
Venezuela's President Hugo Chavez pushed a vague peace plan for Libya, saying he had spoken to his friend Gaddafi who had supported the plan for a negotiating commission, accusing the West of eyeing the North African nation's oil.
The popular uprising against Gaddafi's 41-year rule, the bloodiest yet against a long-serving ruler in the Middle East or North Africa, has knocked out nearly 50 per cent of the OPEC-member's 1.6 million barrels of oil per day output, the bedrock of its economy.
The upheaval is causing a humanitarian crisis, especially on the Tunisian border where tens of thousands of foreign workers have fled to safety. But an organised international airlift started to relieve the human flood from Libya as word spread to refugees that planes were taking them home.
Rebels holding the port city of Zawiyah, 50 km (30 miles) west of the capital, Tripoli, said they had launched counter-attacks against Gaddafi's forces massing in the area and warned supplies of medicines and baby milk were running low.
"Women and children are at home while the men are armed and roam the streets and city limits in anticipation of a major attack by pro-Gaddafi forces," resident Ibrahim told Reuters by telephone, giving only one name.
In eastern Libya, witnesses said a warplane bombed Brega, an oil terminal town 800 km (500 miles) east of Tripoli, for the second day on Thursday. Warplanes also launched two raids against the nearby rebel-held town of Ajbadiya, witnesses said.
Al Arabiya news network said on Friday Gaddafi's forces renewed bombing of the Libyan oil terminal of Brega, but three sources in the town said they were not aware of any new attack.
The Pentagon said there was evidence Gaddafi's forces were dropping ordnance but it was not clear if warplanes were bombing rebel forces.
As international efforts progressed to isolate the Libyan leader, Austria widened an asset freeze list on Friday to include a top official at the Libyan Investment Authority, Mustafa Zarti, because of possible links to Gaddafi's inner circle.
Gaddafi's government took foreign journalists on a tour of western Libya as part of efforts to show he was in control.
Towns and villages erupted in jubilation as the convoy passed through. Crowds of supporters shouted "God, Muammar, Libya, together" and children kissed portraits of Gaddafi.
Yet signs of resistance were apparent. In several towns, buildings had been torched and many house fronts were covered with anti-government slogans, a Reuters reporter said.
The roads were heavily fortified with Gaddafi's army tanks, anti-aircraft guns and truck-mounted rocket launchers.
GADDAFI FORCES DEPLOY
In Zawiyah, residents said Gaddafi's forces had deployed in large numbers over the past days. "We estimate there are 2,000 on the southern side of town and have gathered 80 armoured vehicles from the east," resident Ibrahim said, adding a battalion had also come from the west side.
"But our youths are not sitting idle. We killed two of their men last night and operations like these allow us to build up our arsenal. We have already seized 10 to 15 of the army's tanks and a large number of Kalashnikovs," he said.
His account could not immediately be verified.
The government says it is not using military force to retake rebel-held cities although one official did not rule it out if all other options were exhausted.
"Workers at Zawiyah's public hospital went today (Thursday) to Tripoli to get some (medical supplies) for the civilians wounded during clashes ... but the administration there that supplies public hospitals refused to hand them any simply because it was destined for Zawiyah," Ibrahim said.
Another resident, Ali, told Reuters by telephone: "We are starting to have problems with supplies for some medicines as well as getting baby formula ... Libya needs help from the international community. We only want our freedom."
The International Committee of the Red Cross (ICRC) said reports indicated two Libyan Red Crescent ambulances were shot at in Misrata, west of Benghazi, and two volunteers were wounded. The ICRC has 12 staff in Benghazi including a medical team visiting areas outside the city in cooperation with the Libyan Red Crescent.
On Thursday, Venezuela said Gaddafi had agreed to its proposal for an international commission to negotiate an end to the turmoil in the world's 12th largest oil exporting nation. Venezuela hopes Brazil's former President Luiz Inacio Lula da Silva could head the peace commission, a government source said.
Gaddafi's son Saif al Islam said there was no need for foreign mediation in the crisis, a leader of the uprising rejected talks with the veteran leader and the Arab League said cautiously the plan was "under consideration".
In Paris, French Foreign Minister Alain Juppe said France and Britain would support the idea of setting up a no-fly zone over Libya if Gaddafi's forces continued to attack civilians.
But Juma Amer, secretary for African affairs at the Libyan Foreign Ministry, told journalists: "Media reports that civilian areas were bombed are false."
Saif said Brega was bombed to scare off militia fighters and to gain control of oil installations. "The bombs (were) just to frighten them to go away," he told Britain's Sky News.
On the ground, rebels leading the unprecedented popular revolt pushed their front line west of Brega. They said they had driven back troops loyal to Gaddafi to Ras Lanuf, site of another major oil terminal, 600 km (400 miles) east of Tripoli.
In The Hague, International Criminal Court prosecutor Luis Moreno-Ocampo said Gaddafi and members of his inner circle could be investigated for possible war crimes committed since the uprising broke out in mid-February.