Libyan leader Muammar Gaddafi sent armored forces into a western town to reassert control on Saturday but ran into rebel resistance and Arab satellite television channels said tanks fired at residential buildings.
"Now with all the artillery, tanks and armored vehicles, we're seeing battles and killings we haven't seen in Iraq. I consider it total genocide," said one witness who spoke to Al Arabiya television from the coastal town of Zawiyah.
"The battles have now entered the city. More than 15 armored vehicles entered two hours ago along with a tank. There is heavy firing in all the areas and mosques have announced 'jihad' against these brigades," the man told Al Arabiya.
Al Jazeera carried similar reports about fighting in Zawiyah, 30 miles west of the capital Tripoli, and said tanks had fired on homes.
The rebel force spokesman in Zawiyah, reached by Reuters, said Gaddafi's forces had reasserted broad control of the Mediterranean coastal town after fighting on Friday but ran into fighters holed up in buildings around a central square.
"Something bad will happen today. It will be war," spokesman Youssef Shagan said by telephone from Zawiyah.
"There are tanks all around the square. They've closed all the roads, they're using tanks and heavy weapons to cover their soldiers. We want to take it back (Zawiyah) by any means."
In eastern Libya, rebel fighters said they had gained further ground in a westward thrust against Gaddafi's forces, taking the town of Bin Jawad some 525 km east of Tripoli.
Earlier in the day further east, however, conflict broke out again in the oil port of Ras Lanuf, 660 km from Tripoli, when rebels fired on a swooping government army helicopter a day after they reported capturing the town, witnesses said.
A two-week-old uprising against four decades of autocratic Gaddafi rule has left undisciplined but dedicated rebels generally dominant in eastern Libya and his government in the west. But the latest fighting suggested front lines were far from clear and could shift quickly.
Counter-attacks by Gaddafi loyalists this week suggest the flamboyant autocrat will not go quietly or quickly as leaders in neighboring Egypt and Tunisia did in a tide of popular unrest rolling across the Middle East.
There was no sign of pro-Gaddafi soldiers in Ras Lanuf on Saturday although the government had denied the rebel claim on Friday to be in control of Ras Lanuf.
Just before the helicopter swooped, the town had been calm with the rebel flag waving over a major roundabout.
A day earlier, flashes and thuds had resounded from fighting around the area of Ras Lanuf, a major oil terminal of the OPEC producer that sits on the Mediterranean coast. Helicopters had strafed positions of rebels, who fired rifles back.
At a checkpoint at the entrance to the town on Saturday, there was a rebel checkpoint, manned by half a dozen soldiers. Asked if rebels were in charge of the whole town, one soldier replied: "Everything, 100 percent, it is completely safe."
A little before the entrance of the town there was also rebel checkpoint near one oil installation, manned by up to a dozen rebels armed with light weapons.
Inside Ras Lanuf, the town was a scene of calm in the early morning. About 25 people were queuing for bread.
"It's not a normal situation, but you have to be prepared for this situation. I am very pleased, we all are. We are finished with Gaddafi," said Saleh Mohamed, 37, works as an administrator in an oil firm.
In diplomacy aimed at quelling upheaval that has jacked up oil prices, a group of mostly Latin American states in a leftist bloc behind Venezuelan President Hugo Chavez endorsed his plan on Friday for an international mediating mission on Libya.
But Chavez's chances looked slim for now since the rebels have ruled out talks unless they lead to Gaddafi's resignation or exile, outcomes he has categorically ruled out.
Disaffected Libyans see Chavez as too close to Gaddafi, whom the Venezuelan leader calls a friend. It was unclear whether the plan has gained any traction with other countries.
In Zawiyah, a town whose control by rebels earlier this week had embarrassed the government, "dozens were killed and more were wounded" by pro-Gaddafi forces on Friday, said Mohamed, a resident. "We have counted 30 dead civilians."
Rebel fighters retreated but were still holding the central Martyrs Square later in the day, Shagan said then.
A Libyan government official said the town had fallen. "It's been liberated, maybe there are still some pockets (under rebel control) but otherwise it's been liberated."
Rebels have already seized control of much of the rest of eastern Libya, where Libya's oil fields are concentrated and opposition to Gaddafi has traditionally been strongest, in a popular uprising centered on Benghazi, Libya's second city.
The revolt is the bloodiest yet against long-entrenched rulers common across the Middle East and North Africa. The past few weeks saw the overthrow of the veteran presidents of Tunisia and Egypt -- Libya's western and eastern neighbors.
News of the fighting thrust U.S. crude prices to their highest levels since September 2008, and Brent crude futures for April delivery rose $1.36 to $116.17 a barrel.
The International Energy Agency said the revolt had blocked about 60 percent Libya's 1.6 million bpd (barrels per day) oil output. The loss, due largely to the flight of thousands of foreign oil workers, will batter the economy.
The upheaval has caused a humanitarian emergency on the Tunisian border where tens of thousands of foreign workers have fled to safety. An international airlift is under way, reducing the number of refugees stranded in tented camps.
Western leaders have urged Gaddafi to go and are considering various options including the imposition of a no-fly zone, but are wary about involving their militaries after wars in Afghanistan and Iraq deeply unpopular at home.