Forces loyal to Libyan leader Muammar Gaddafi have stormed the oasis town of Jalo, south of the rebel bastion of Benghazi, killing up to 10 people, rebels say.
"There was strong resistance from the rebels and four of them were killed," said a chicken farmer turned freedom fighter who travelled for four hours by car to reach Benghazi and deliver the news.
"Some Gaddafi troops were killed but they took the bodies with them so we do not know how many," Aisa Sunus, 40, added.
He said Gaddafi forces entered Jalo from its southern checkpoint and clashed with rebels at the heart of the town before moving on to nearby Ojla, where they met no resistance and raised the green flag of the Tripoli regime.
Loyalist troops, he added, split up after exiting Jalo, taking shelter in two separate oil facilities - facility 103 to the southwest and Nafura to the northeast - on the outskirts of the town.
"They are seeking supplies and shelter in these facilities, knowing Nato will not strike them," Sunus said, adding Jalo was back under rebel control and that "no one was fleeing the town".
Mobile phone networks in Jalo, a town of about 20,000, where people have traditionally made a livelihood out of palms, dates and livestock, or working in nearby oil complexes, are currently not working.
Rebels used satellite phones to spread the news of the assault, triggering alarm and speculation in Benghazi, where the opposition has set up its headquarters.
"Seventy cars entered Jalo, coming from the south," said a rebel fighter.
"They killed six civilians - one of them was getting bread from the bakery, the other five were workers," the rebel fighter told AFP by telephone.
"It seems Gaddafi is trying to open another front in the south," said a second rebel, also contacted by phone.
"Gaddafi has troops travelling around the desert to spread fear, death and destruction but he doesn't have the numbers to hold the gains," said Jalal al-Gallal, a TNC media official.
AFP was unable to contact medical or local government officials in Jalo to confirm the reported death tolls.
An analyst said loyalist troops attempting to reach Ajdabiya from the south have to cross Jalo and Kufrah, a strategic city in Kufrah province, which lies in the southeastern corner of the country, bordering Chad, Sudan and Egypt.
"The south is an area of advantage for Gaddafi as there has always been considerable military aid coming from the border countries, especially Chad," said Abeir Imneina, a political science professor in Benghazi.
Gaddafi's gains were downplayed by a senior rebel general and a doctor who has relatives in the oasis town.
"Gaddafi forces are in their last stage so they won't be able to advance to Ajdabiya," said a defected army general who joined rebels in Jalo but had spent the last two days in Benghazi.
He told AFP, however, he had no immediate plans to return to Jalo because the "road had become not safe" and Gaddafi troops had "orders to capture" him.
"It is just a propaganda move, Gaddafi wants to show he is everywhere," a Libyan doctor organising emergency relief to the town told AFP.
"We will provide food and medical aid to Jalo," Mohamed al-Banoni said.
The rebels said the troops that entered Jalo were the same ones that on Thursday swept into Kufrah, which lies hundreds of kilometres further south.
At the time, a rebel spokesman said there were "no casualties" there as rebels withdrew after "putting up a light resistance", and that Gaddafi forces were "now in control of three quarters of the city".
AFP was receiving mixed reports about who now held the desert town.