Forces loyal to Libyan leader Muammar Gaddafi have shelled an oil refinery supplying the rebel-held city of Misrata after insurgents pushed their front west towards the coastal town of Zlitan.
Any fighting over Zlitan would bring the rebellion closer to Tripoli, the Libyan leader's stronghold, which lies 200km west of Misrata.
A Reuters correspondent near Misrata port said six rockets hit generators at the refinery, leaving them heavily damaged.
'The damage is enough to halt production at the refinery, which has been working at a fraction of its full capacity to supply the city of Misrata,' Juma Abu-Fonas, an engineer on site, told Reuters.
He could not say how long it would take for the generators to be fixed or new ones to be installed.
A Reuters photographer in Misrata, the biggest rebel stronghold in western Libya, had earlier joined the rebel advance towards Zlitan.
He was taken to the furthest rebel point along the main road, where rebels had shifted shipping containers and sand to block the road and provide cover for their fighters.
The two sides traded heavy artillery fire after the rebels took control of a mosque in farmland beside the road.
Meanwhile, Germany has recognised Libya's rebel council as the legitimate representative of the people.
The recognition, voiced by Foreign Minister Guido Westerwelle on a visit to the rebel stronghold of Benghazi, was significant because Germany has been reluctant to be drawn into the conflict and opted out of NATO military action.
'We share the same goal - Libya without Gaddafi,' Mr Westerwelle told reporters after meeting members of the National Transitional Council, seen by many as a government-in-waiting.
Countries that have recognised the rebel council include France, Italy, Qatar and the United Arab Emirates.
US Secretary of State Hillary Clinton urged African leaders to follow suit and abandon Gaddafi.
