With air supremacy and a big advantage in tanks, Gaddafi`s forces are keeping up the momentum on the ground.
"The rebel forces, who for weeks rapidly advanced on the capital Tripoli in a bid to oust Gaddafi, are loosing steam to the better armed government forces," al-Jazeera reported from Brega.
Anti-Gaddafi rebels have been pushed out of the northern oil town of Ras Lanuf, reports said. BBC said the government forces now control the town and its oil refinery.
The fall of the town was confirmed by Libya`s former interior minister Gen Abdul Fateh Younis, who has defected to the rebels. But he vowed that his fighters would launch a counter-attack latest by Sunday.
The Arab channel said that Gaddafi`s forces were now in a good position to take on Benghazi, Libya`s second largest city and the seat of the rebels` National opposition Council, which was recognised by France recently.
Columns of Libyan tanks backed by fighters and gunships entered the city of Brega, which was captured by the rebels just a week back after fierce fighting.
Under pressure from the pro-Gaddafi forces, the rebels have repeatedly called on the international community to impose a `no-fly` zone to stop air strikes on cities, but have been against foreign military intervention on the ground.
The 22-member Arab League at an emergency meeting in Cairo today mulled support of plans to impose a no-fly zone over Libya.
It is also considering to open channels of contact with rebel body of national council, media reports quoting sources said.
"The United Nations, the Arab League, the African Union, the Europeans - everyone should participate," Amr Mussa, the League`s Secretary General, told the German weekly Der Spiegel.
A sanction by the Arab League is likely to pave the way for the US and its European allies to go ahead with enforcing the zone, which effectively neutralise Gaddafi`s air power.
As the sea-saw battle continued in Libya, US President Barack Obama has warned that "the noose" around Libyan ruler was tightening and said the international community had an obligation to prevent a Rawanda-style civilian massacre in the north African nation.
"Across the board, we are slowly tightening the noose on Gaddafi," Obama said at a White House news conference, which was dominated by the Libyan uprising and the Japanese tsunami tragedy.
In his first indication of a US tilt towards Libyan rebels, Obama said he would appoint an envoy to Libyan opposition forces as part of efforts to "change" the balance of the military situation in the war-torn country.
Expressing concern over Gaddafi targeting civilians, the US president said: "I`m concerned. Gaddafi has stash of weapons and some troops that remain loyal to him and there have been reports that he`s also been hiring mercenaries."
The President did not disclosed whether the US and its allies would go ahead to arm the rebels as has been demanded by the Libyan opposition leaders.
"We have determined that it`s appropriate for us to assign a representative to interact with the opposition and determine ways that we can further help them," Obama said in Washington.
Secretary of State Hillay Clinton on Monday will meet rebel representative in Paris, Mahmoud Jibril, the head of foreign affairs in the National Council.
Hours later the US slapped sanctions against Gaddafi`s wife, children and his closest advisers.
As pro-Gaddafi forces continued their assault on rebels in Libya, top US Senators have asked the Obama administration to take "meaningful actions" against the country`s regime before it is too late, including through imposition of a no-fly zone and recognition of the opposition National Council.
The US should take actions like "the imposition of a no fly zone, recognition of the Transitional National Council as the legitimate government of Libya, and provide assistance to them that will help them prevail in their fight against (Muammar) Gaddafi," Senators John McCain and Joe Lieberman, said in a joint statement.
Mustafa Abdul-Jalil, the head of the opposition`s interim governing council, warned of "catastrophe in Libya " if the US and other Western nations fail to act.
"If there is no no-fly zone imposed on Gadhafi`s regime, and if his ships are not checked then we will have a catastrophe in Libya," Abdul-Jalil was quoted as saying in the media.
He also ruled out the possibility on any kind of a deal with Gadhafi to ease him out and resolve the crisis.
Meanwhile, stung by the recognition accorded to the Libyan opposition, the Gaddafi regime decided to "suspend" diplomatic relations with France.