TRIPOLI – Moamer Kadhafi's son said on Thursday victory was in sight against rebels fighting his father's iron-fisted regime after loyalist forces retook two key towns and Western powers fretted over how to deal with the civil war while tightening the screws further.

He spoke after NATO and the European Union began 48 hours of crisis talks, amid growing calls for the imposition of a no-fly zone over Libya, reports France would even support selective air strikes and more ships being deployed to the area.

"We're coming," Seif al-Islam told young regime supporters in Tripoli, referring to the advance of government forces towards the eastern rebel bastion of Benghazi.

"I send a message to our brothers and friends in the east who are sending us daily calls for help and asking us to rescue them: we're coming," he said.

"Victory is in sight. Victory is near," he told the exuberant youths. "I swear before God that we're going to win."

Earlier, in an interview broadcast on Britain's Sky News and BBC TV, Seif said the regime would "never surrender" to the rebels and did not fear foreign intervention.

"This is our country, we will never, ever give up and we will never, ever surrender," he insisted.

"We are not afraid of the American fleet, NATO, France, Europe. This is our country. We live here, we die here. We will never, ever surrender to those terrorists."

The momentum in the conflict is shifting in favour of Kadhafi's forces are "robustly equipped" with Russian weapons and likely to defeat the rebels, US officials said.

"Initially the momentum was with the other side," Lieutenant General Ronald Burgess, director of the Defence Intelligence Agency, told US senators.

"That has started to shift. Whether or not it has fully moved to Kadhafi's side at this time is not clear. We have now reached a state of equilibrium. The initiative may be actually be on the regime side."

With its fighters in retreat, the opposition appealed to Western powers meeting in Brussels to follow France's lead in recognising their national council.

In Washington, White House spokesman Jay Carney said the United States is in "direct contact" with senior opposition people, including members of the rebel national council.

"We are coordinating with the opposition, with the council to provide assistance and to determine the best ways we can support their aspirations," he added, while saying Washington is still trying to get a sense of "what their vision is, who they represent, what their ideas are and where they would take Libya."

Targeted by rocket fire, rebels fled from Ras Lanuf, a strategic coastal oil town in eastern Libya they captured last Friday, AFP reporters said.

A hospital official in Brega, about 85 kilometres (52 miles) further east along the Mediterranean coast, said: "We have four dead and 35 wounded, but there's still many more coming" in from Ras Lanuf.

Medics say 400 people have died and 2,000 more been wounded in eastern Libya since February 17.

On the battlefield, rebel vehicles streamed eastward from Ras Lanuf after hours of heavy shelling and rocket attacks.

Other rebels appeared to stay in town, but dejected fighters said they had been defeated as rockets exploded and there was at least one air strike.

"We've been defeated. They are shelling and we are running away. That means that they're taking Ras Lanuf," said one rebel fighter.

In the west, an intense battle for control of Zawiyah, the site of major oil installations 50 kilometres west of Tripoli, ended in victory for Kadhafi's forces on Wednesday night.

"The town is now under the army's control," said a resident by telephone on Thursday.

Rebels overran Zawiyah soon after a popular uprising erupted against Kadhafi on February 15, and the city had been under assault for several days by artillery and tanks.

Despite the loss of Zawiyah, a rebel in the mountainous Jabal al-Gharbi region some 90 kilometres to the south said "revolutionaries control several towns" in that area, including Zintan, which was the site of earlier fighting.

In Brussels, NATO and the European Union were meeting on Thursday and Friday to ponder military and economic options against Kadhafi, which could include a no-fly zone, humanitarian aid and economic props.

A source close to Nicolas Sarkozy, who asked not to be named, said the French president will propose "striking an extremely limited number of points which are the source of the most deadly operations" by Kadhafi loyalists.

The sites being considered are Kadhafi's Bab al-Azizia command headquarters in Tripoli, a military air base in Sirte, east of Tripoli and another in Sebha in the south, the source added.

The president's office declined to confirm the claim when contacted by AFP.

France, which on Thursday recognised the rebel national council, has seized the initiative in pressure against Kadhafi and has been working with Britain to lobby for a United Nations Security Council imprimatur for a no-fly zone.

The United States wants any military action conducted under the banner of the North Atlantic Treaty Organisation, with Arab regional backing seen as essential.

In Washington, the director of US national intelligence, James Clapper, said "the Libyan air defence structure on the ground, radar and surface-to-air missiles, is quite substantial."

NATO chief Anders Fogh Rasmussen said that "if there is a demonstrable need, if we have a clear mandate and strong regional support, we stand ready to help."

He told a news conference "it has been decided to increase the presence of NATO maritime assets in the central Mediterranean" to bolster surveillance of Libya and monitor an arms embargo.

However, there was no decision to launch a no-fly zone -- opposed by Germany -- with the alliance endorsing further military planning if the United Nations endorsed the move.

But with Russia opposing an air exclusion area, UN backing appeared unlikely for any move to shut down Kadhafi's air force.

The ministers also called for urgent "detailed planning" for humanitarian efforts and for possible measures to enforce the arms embargo if called on by the UN Security Council, Rasmussen said.

The rebel national council, the Gulf Cooperation Council (GCC) and the Organisation of the Islamic Conference, a grouping of Muslim countries, have already called for a no-fly zone.

NATO has stepped up surveillance of Libya's air space with radar-equipped aircraft, Rasmussen said.

Arab states in the Gulf said on Thursday that Kadhafi's regime was illegitimate and that contacts should be initiated with the rebels.

In other developments, Greece announced that a plane was on the way to Tripoli to collect three Dutch soldiers freed after being captured last month in a botched attempt to evacuate two civilians by navy helicopter.

Elsewhere in the volatile Middle East, Yemen's President Ali Abdullah Saleh bowed to pressure after a month of violent protests, but his pledge to devolve power to parliament was swiftly rejected as too late by the opposition.

World oil prices dived on Thursday, despite jitters over Libyan unrest on the eve of planned protests in OPEC kingpin Saudi Arabia.

New York's main contract, light sweet crude for delivery in April, tumbled $2.94 to $101.44 a barrel. Brent North Sea crude for April slid $1.80 to $114.14 per barrel.