Libyan leader Muammar Gaddafi is facing dramatic shortages of fuel for his soldiers and citizens in Tripoli, and he is running out of cash to pay his forces and what is left of his government, according to the latest US intelligence reports.

Nato warplanes have struck a missile-launching position used by Muammar Gaddafi’s forces to target civilians in western Libya, the alliance said.

Nato has denied a Libyan government charge that it is intentionally using its air strikes to help rebel advances, saying it is sticking to its mandate to protect civilians.

Libya's deputy foreign minister accused Nato today of intensifying its bombing campaign and backing foreign mercenaries to lay the groundwork for an advance by rebels trying to topple Muammar Gaddafi's regime.

Libyan rebels have broken the government siege of two western mountain towns, a rebel commander said, while Nato pounded 10 targets across the country.

Muammar Gaddafi loyalists staged a show of support in the Libyan capital today, claiming the rebel insurgency is nearing its end.

Forces loyal to Libyan leader Muammar Gaddafi have shelled villages and towns to try to take control of the high ground in a western mountain range.

Forces loyal to Muammar Gaddhafi’s loyalists shelled a mountain town and clashed with opposition forces in a besieged coastal city today as the Libyan leader sought to quell resistance in the western part of the country that is largely under his control.

Thousands of Libyans are being forced to flee into Tunisia after forces loyal to Muammar Gaddafi’s forces began shelling mountain towns in the west of the country Libya, rebel leaders said today.

Libyan rebels have fought off an attempt by Muammar Gaddafi's troops to retake a key oil town in a day-long battle.