After heavy fighting on Friday, the rebels were in control of Ras Lanuf, a pipeline hub on the Mediterranean coast that houses a major refinery and petrochemical complex, an AFP correspondent reported.

Hospitals in rebel-held towns to the east said they had received up to 10 dead and more than 20 wounded from Friday’s fierce fighting for the town, 200 kilometres (120 miles) east of Sirte, the Libyan strongman’s hometown which is still in the hands of his loyalists.

The death toll from twin explosions at an arms dump in the rebel-held east of Libya meanwhile reached 27. The cause of the blasts remained unclear.

In Libya’s second city Benghazi, headquarters of the rebel forces which control virtually the whole of the east, a spokesman for their self-declared national council said it was poised to hold its first session — in secret for fear of assassination.

*”The national council’s first formal meeting is starting this morning,”* Mustafa Gheriani told AFP, but did not disclose a time or place.

*”It’s a safety issue. This guy (Kadhafi) still assassinates people.”*

Former justice minister Mustafa Abdel Jalil, one of the first high-proile Libyans to defect from Kadhafi’s four-decade regime when the uprising began more than two weeks ago, has been appointed chairman of the 30-member body.

Rebels say they have set up local councils in cities they hold across the east and intend their transitional government to lead the country into an election, although Kadhafi is still firmly in control of the capital.

Some members of the opposition in Benghazi are keen to open a diplomatic front to their 18-day-old struggle against Kadhafi, demand international recognition and source revenue in order to function.

Rebels want the council, and not the Kadhafi regime, recognised as the legitimate government of Libya and for all Libyan foreign missions in the world to be recognised as the representatives of their “revolution”.

*”Any embassies that are still with Kadhafi should not be recognised and (should be) considered outlaws,”* one opposition member told AFP on condition of anonymity.

Kadhafi’s regime is still being boosted by millions of dollars of oil export revenues despite Western sanctions, the Financial Times reported.

The business newspaper, citing a senior Western oil official and traders, said payments for oil exports were finding their way back to Libya’s central bank, and possibly into Kadhafi’s control.

The crude shipped over the past fortnight is worth about $770 million (550 million euros) at current price levels, the paper added.

Reporting from Zawiyah, a middle class dormitory where some of Kadhafi’s key lieutenants have homes, Sky News correspondent Alex Crawford said residents had sheltered in mosques as troops of the still loyal Khamis Brigade, under the command of one of the Libyan leader’s sons, tried to retake the centre.

Crawford said the city’s hospitals had received at least eight dead and said she had also seen the bodies of up to a dozen Kadhafi loyalists in the market square which has been the focal point of the anti-regime protests in the city.

*”There was such intense fighting for three hours, and lots and lots of casualties… I saw people with blown off legs, with blown off ankles, chest wounds, head wounds,”* she said.

*”They are all celebrating on the market square. There are three tanks that they have been captured and are on fire. There are still firing, but at the moment that appears to be firing in jubilation.”*

Crawford said that some army defectors had brought their weapons with them, including anti-tank weapons, anti-aircraft weapons and even a few tanks.

*”How they managed to fight them back is absolutely a minor miracle,”* she said, adding that the pro-Kadhafi troops remained on the outskirts of the city and that residents were bracing for a further assault.

Rebel fighters in the east were also jumpy on Saturday, nervous about the prospect of retaliatory air strikes by pro-Kadhafi forces after their capture of the oil town of Ras Lanuf.

*”We heard there’s an airplane coming,”* said one fighter as his unit scattered near the hospital in Brega, the next oil town eastward along the Mediterranean coast.

Some of the injured rebels being treated in Ajdabiya, further east, told AFP they had been heavily outnumbered and under-equipped compared to the loyalists.

*”Kadhafi forces had heavy weapons. Most of the rebels just had Kalashnikovs. I was hit in the chest by an RPG (rocket-propelled grenade). I lay on the roadside, then an ambulance took me to Brega and then to Ajdabiya,”* said Osama Ahmad, 28.

In Benghazi, Imad Talahma, a neurosurgeon at medical city, said the hospital had received eight dead and more than 20 injured from Friday’s mystery blasts at the Rajma military base just outside the city.

Sources at Benghazi’s other two main hospitals had earlier given a combined toll of 19 dead.

*”We’re not quite sure whether it was sabotage, an accident or an air strike, but nobody saw any planes,”* Gheriani, the rebel national council spokesman, said.

With the protests spreading across the Arab world, threatening strategic US allies like Bahrain and Oman, the Wall Street Journal reported that Washington was moving towards a strategy of keeping regimes which are willing to reform in power.

Citing unnamed officials and diplomats, the newspaper said the administration was leaning toward this approach even if that means the full democratic demands of Arab citizens might have to wait.

*”What we have said throughout this is that there is a need for political, economic and social reform, but the particular approach will be country by country,”* The Journal quoted a senior administration official it did not identify as saying.