If Zawiya, on Tripoli's doorstep, is ultimately retaken, the contours of a stalemate would emerge - with Libya divided between a largely loyalist west and a rebel east as the world wrestles with the thorny question of how deeply to intervene.
President Barack Obama and British Prime Minister David Cameron agreed to plan for the "full spectrum of possible responses" on Libya, including imposing a no-fly zone to prevent Gadhafi's warplanes from striking rebels. According to a White House statement, the two leaders spoke Tuesday and agreed that the objective must be an end to violence and the departure of Gadhafi "as quickly as possible."
A spokesman for the opposition's newly created Interim Governing Council in Benghazi, meanwhile, said a man who claimed to represent Gadhafi made contact with the council to discuss terms for the leader of four decades to step down. Mustafa Gheriani told The Associated Press the council could not be certain whether the man was acting on his own initiative or did in fact represent Gadhafi.
"But our position is clear: No negotiations with the Gadhafi regime," said Gheriani, who declined to say when contact was made or reveal the identity of the purported envoy.
Libyan state television denied that Gadhafi had sent an envoy to talk to the rebels.
In London, British Foreign Secretary William Hague said that neither Gadhafi nor rebel forces appeared currently able to establish supremacy. "At the moment ... it seems that either side lacks the immediate power to overthrow the other," he said.
Later Tuesday, Gadhafi made a surprise appearance at a hotel hosting foreign correspondents in Tripoli, arriving just before midnight. He raised his fist in the air as he walked from his car to the hotel, then he went into a room separated by curtains for exclusive interviews with a Turkish and a French television station.
He stayed about an hour, then he left without speaking to the AP and other news organizations waiting outside.
"Gadhafi was in a very good mood and he wanted to clarify the situation in Libya," Abdelmajid al-Dursi, Gadhafi's director of foreign media said afterward.
Zawiya, a city of 200,000, was sealed off under a fifth day of a destructive siege, with conflicting reports of who was in control. A brigade led by one of Gadhafi's sons, Khamis, is believed to be leading the assault, shelling neighborhoods with tank and artillery fire from the outskirts and trying to push troops in to the city's central Martyrs Square where rebels had set up camp.
The city hospital has been overwhelmed with dead and wounded and many houses have been damaged, according to residents who escaped the past two days. One man who slipped out of the city on Monday said pro-Gadhafi forces had seized the central square.
An adviser to the Libyan Foreign Ministry in Tripoli on Tuesday also claimed that government troops were in control, raising the green flag over the square. The adviser, who is originally from Zawiya, said he was trying to mediate a cease-fire with remaining rebels. He spoke on condition of anonymity because of the sensitivity of the talks.
But a resident of the nearby town of Sabratha said people who fled from Zawiya on Tuesday afternoon told him fighting continued, with rebels back in control of the square. He said they reported hit-and-run attacks between the two sides.
The various reports could not be independently confirmed. Electricity, phone and Internet services have all been cut in the city, making it impossible to reach witnesses inside Zawiya, just 30 miles west of Tripoli.
The recapture of Zawiya would be a significant victory for Gadhafi, easing a threat just outside his main bastion in the capital. If his forces can hold it, it would free up troops to deploy against other rebel-held areas.
The fall of Zawiya to anti-Gadhafi residents early on in the uprising that began Feb. 15 had illustrated the initial, blazing progress of the opposition. The uprising swept over the entire eastern half of the country, breaking it out of the regime's control, and seized Zawiya and several other cities and towns in the northwestern pocket of the country where Gadhafi's regime was confined.
But the government could be regaining some balance and its capability to lash back with powerful force.
The battle is far from over and could be drawn out into a long and bloody civil war. The latest round of fighting on opposite ends of Libya's Mediterranean coast once again revealed the weakness and disorganization of both sides.
Even if it ends with Zawiya's recapture, the long siege of the city underlined the rebels' tenacity and the struggles of even a reportedly elite force like the Khamis Brigades to crush them.
At the same time, Gadhafi's regime has been using its air power advantage more each day to check a rebel advance west toward Tripoli on the main coastal highway leading out of the opposition-controlled eastern half of the country. The increasing use of air power underlines the vulnerability of the rebel forces as they attempt to march across open, desert terrain - but it also could prompt world powers to impose a no-fly zone over Libya to deny Gadhafi that edge.
In the east, Gadhafi's forces succeeded over the weekend in blunting the rebels' attempt to march toward Tripoli, repelling them from Bin Jawwad, a small town 375 miles (600 kilometers) east of the capital, and driving them back to the oil port of Ras Lanouf, further east.
On Tuesday, troops fired barrages of rockets at a rebel contingent that tried to move out from Ras Lanouf. At least 26 wounded were rushed to the hospital in the town, some of them with legs lost and other serious injuries, according to doctors there.
"I was hit in the arm and leg, my friend was wounded in the stomach," Momen Mohammad, 31, said while lying in a hospital bed.
Earlier in the day, warplanes launched at least five new airstrikes near rebel position in Ras Lanouf, one hitting a two-story house in a residential area, causing some damage. None of the strikes appeared to cause casualties, suggesting they were intended to intimidate the fighters, according to an Associated Press reporter who saw the strikes. The anti-regime forces were not taking any chances and were spreading out deep inside the desert around the area in small groups.
The rebels seem to have reached a point of their campaign where they need to figure out how to organize resupply lines and avoid becoming easy targets for warplanes in their march across the open desert region with little cover. The extent of their westward reach is a checkpoint about six miles (10 kilometers) west of Ras Lanouf.
In Benghazi, Libya's second largest city and the main rebel stronghold in east, there was an unusual attack after weeks of quiet that followed the rebel capture of the territory. Assailants in a car tossed a grenade at a hotel where foreign journalists were staying, but there were no casualties and only some light damage to windows, an opposition official said.
In diplomatic action, the United States and its NATO allies edged closer Monday to formulating a military response to the escalating violence in Libya as the alliance boosted surveillance flights over the country and the Obama administration signaled it might be willing to help arm Gadhafi's opponents. Europe, meanwhile, kick-started international efforts to impose a no-fly zone.
France and Britain have taken the lead in drafting a U.N. Security Council resolution that would establish a no-fly zone over Libya to prevent Gadhafi's warplanes from bombing civilians and rebels.
It still appeared unlikely that U.S. warplanes or missiles soon would deploy in Libya. British and French officials said the no-fly resolution was being drawn up as a contingency and it has not been decided whether to put it before the U.N. Security Council, where Russia holds veto power and has rejected such a move.
Western officials have said a no-fly zone does not require a U.N. mandate, but they would prefer to have one.
An official with a subsidiary of Libya's national oil company said Tuesday that production has dropped by about 90 percent, a reflection of the beating the OPEC member's oil sector is taking amid violence raging in the country.
Sirte Oil Co. is producing about 9,500 barrels per day, compared to normal production levels at about 95,000 barrels per day, said company official Ahmed Jerski.
Analysts estimate that more than half of Libya's almost 1.6 million barrels per day in production is being shut-in, and the disruption in exports has sent global oil prices skyrocketing.
The U.S. benchmark crude contract for April delivery was hovering slightly below $104 per barrel on Tuesday, retreating from highs of almost $107 per barrel a day earlier. The drop came as several OPEC ministers said they were talking informally about whether to ramp up production to offset the Libya supply drop.
But a Red Crescent official said Tuesday that soldiers loyal to Gadhafi have blocked some 30,000 migrant workers from fleeing into Tunisia and forced many to return to work in Tripoli.
Ibrahim Osman of the International Federation of Red Cross and Red Crescent Societies told The Associated Press that the migrant workers were rounded up and held in Libyan immigration buildings near the Tunisian border last week.
Osman, who heads the agency's assessment teams in northern Africa, said Gadhafi soldiers were forcibly returning many of the 30,000 Bangladeshis, Egyptians and sub-Saharan Africans nearing the Ras Ajdir border crossing. He said loyalists held a pro-government demonstration at the crossing and appear to have forcibly return the migrants to service jobs.
Schemm reported from Ras Lanouf. Ryan Lucas contributed to this report from Benghazi, Libya.