There are conflicting reports emerging from Zawiyah following fierce clashes between rebels and state forces in the Libyan city.
Local residents now say rebels have retaken the main square of the western city - pro-Gaddafi forces had briefly regained control earlier in the day.
Al Jazeera reports that several members of Gaddafi's forces, including a general, were killed in today's fighting. At least 40 people are known to have died.
Residents of Zawiyah earlier said pro-government forces used tanks and snipers to drive rebels out of their stronghold in the main square.
Libyan state television had also claimed 'massive' pro-Gaddafi demonstrations subsequently took place in the centre of Zawiyah.
But a tour of the city being organised for foreign reporters was cancelled later without explanation, indicating the rebels had launched a counter-attack.
Medics today said that fighting in eastern Libya has killed at least 400 people and wounded 2,000 since 17 February.
As the nationwide violence continues, Muammar Gaddafi accused the West of wanting to seize Libya's oil.
'The colonialist countries are hatching a plot to humiliate the Libyan people, reduce them to slavery and control the oil,’ Gaddafi said on state television.
He again accused al-Qaeda of being behind the insurrection that began on 15 February.
He called on inhabitants of Benghazi, the rebels' main base, to 'liberate' the eastern city.
Libya's government offered a $410,000 bounty for the capture of Mustafa Abdel Jalil, head of the rebel national council, which declared itself the North African country's sole representative in Benghazi on Saturday.
In a separate television interview with Turkey's public TRT channel, Gaddafi said, paradoxically, he was in favour of a move by the West to impose a no-fly zone over Libya to prevent his forces from attacking rebels from the air.
That would allow 'Libyans to see through the real intentions (of the international community) - to seize our oil - and then they would take up arms (to defend the country).'
NATO role
His comments come as the international community discuss a possible role for NATO in Libya.
Speaking in Brussels on the eve of talks among NATO defence ministers, a senior US official said Washington 'believes that NATO is the natural choice for any military action' in Libya.
But in Paris, a French diplomat insisted that 'alongside Britain, we are working on what could be done without NATO. The sight of the NATO flag (in Libya) would be provocative.'
The discussions came as strong blasts rocked Libya's rebel-held eastern oil town of Ras Lanuf, forcing the insurgents back.
A mechanic said a pipeline had been blown up, while an opposition spokesman said air raids had struck several oil installations.
Scores of rebels packed into dozens of vehicles and retreated into Ras Lanuf after several hours of sustained shelling and at least three air strikes west of the town.
Gaddafi aide arrives in Cairo
Meanwhile, a member of Gaddafi's inner circle, Abdelrahman al-Zawi, landed in Cairo aboard a private Libyan plane, an airport official told AFP.
The purpose of Major General Zawi's visit was not immediately clear. However, it comes as Arab League foreign ministers prepare in the city to discuss a no-fly zone over Libya.
Elsewhere, a 'moderate member' of Gaddafi's regime was en route for Portugal.
He is planning to meet Foreign Minister Luis Amado ahead of a series of key diplomatic meetings in Brussels this week, an EU source said.
The White House said yesterday that US President Barack Obama and British Prime Minister David Cameron had agreed to press forward with planning a range of possible responses.
These included surveillance, humanitarian assistance, enforcement of the arms embargo and a no-fly zone, the White House said.
