Hundreds of rebel fighters have retreated from the strategic oil port of Ras Lanouf as Muammar Gaddafi's army pounds the town with artillery.
The rebels fled eastward in cars and pickup trucks mounted with machine guns.
Battle: A rebel vehicle is hit by a shell fired by soldiers loyal to Libyan leader Muammar Gaddafi, during a battle along the road between Ras Lanuf and Bin Jiwad today.
Forced back: The rebels take over as shrapnel from exploding tank shells fired by Gaddafi's troops rains down on them near the town of Ras Lanuf
All out assault: Gaddafi's tanks head towards Ras Lanuf as the rebels flee before them
Chaotic: The fighters could not resist the full onslaught of Gaddafi's troops who have fought back after initial defeat
One said government forces were raining rockets or tank shells on the city in what appeared to be preparation for a full-scale advance.
Shells fell near a city hospital and hit a series of residential buildings as Gaddafi's tanks moved further along Libya's main Mediterranean coastal road than they have been since the rebels seized most of the country's east.
An opposition fighter with a Kalashnikov rifle said he had fled the frontline outside Ras Lanouf.
NATO defence ministers met in Brussels today to discuss the escalating crisis. Britain had been pushing for a no-fly zone over Libya but after hours of talks, members concluded that the action would not be taken without a unanimous UN resolution.
However, the body resolved to increase the number of ships in the Mediterranean and to tighten up the arms embargo. Extra humanitarian assistance will also be offered.
The meeting came just hours after France became the first country to formally recognise the rebels' Interim Governing Council as Libya's legitimate government.
Rallying cry: Seif al-Islam Gadhafi, son of Libyan Leader Moammar Gadhafi, today vowed to retake the eastern half of his country. He is pictured during a TV interview in Tripoli today
Paris said it planned to exchange ambassadors after President Nicolas Sarkozy met two representatives of the group based in the eastern city of Benghazi.
'It breaks the ice,' said Mustafa Gheriani, an opposition spokesman. 'We expect Italy to do it, and we expect England to do it.'
Germany said it froze billions in assets of the Libyan Central Bank and other state-run agencies. The U.S., UK, Switzerland, Austria and other countries have also frozen Gaddafi's assets.