Moamer Kadhafi is considering leaving the capital Tripoli following a blistering series of Nato air raids, a report said, as Britain warned the "sands of time are running out" for the Libyan leader.
Libya's rebel forces meanwhile called on foreign allies to urgently provide them with weapons as Nato insisted there would be no let-up in its air war.
The Wall Street Journal Friday quoted a senior US national security official as saying American intelligence shows Kadhafi "doesn't feel safe anymore" in the capital where he has ruled for over four decades.
However, officials told the paper they did not see the move as imminent and did not believe Kadhafi would leave the country, a key demand of Libyan rebels who have been battling his forces in a month-old stalemate.
Kadhafi is believed to have numerous safe houses and other facilities both within the capital and outside of it to which he might relocate.
Rebel spokesman Mahmud Shamam told French daily Le Figaro the insurgents were in indirect contact with the regime and may be prepared to allow Kadhafi to stay in Libya, but that he and his family must agree to leave power.
"Our conditions remain the same. It is totally excluded that Kadhafi or members of his family take part in a future government. We are discussing with them the mechanism for Kadhafi's departure," he said.
In the rebels' capital Benghazi, however, the National Transitional Council deputy chairman Abdel Hafiz Ghoga told AFP: "There is no contact, direct or indirect, with the Kadhafi regime."
A senior US commander meanwhile said that the North Atlantic Treaty Organisation (Nato) and Libya's African allies had not adequately planned for the aftermath of Kadhafi's possible fall.
"We, the international community, could be in post-conflict Libya tomorrow and there isn't a plan, there is not a good plan," the senior US commander in Africa, General Carter Ham, told the Wall Street Journal.
He predicted that Kadhafi could fall quickly, and said there may be a need for substantial ground forces in the country to preserve order.
British Prime Minister David Cameron said on Thursday time is running out for Kadhafi after the strongman said he had his "back to the wall" but vowed to battle "to the beyond."
"Time is on our side, time is not on the side of Colonel Kadhafi who's losing his leading military commanders," Cameron told reporters in Prague.
"The sands of time are running out for him, and so we need to be patient and persistent," he added.
Despite the intensive Nato bombing, a stalemate on the battlefield and a string of defections of regime officials and soldiers, Kadhafi remains defiant.
"We will resist and the battle will continue to the beyond, until you're wiped out. But we will not be finished," he said in an audio message on Libyan television late on Wednesday.
Nato has pledged to carry on bombing military targets in Libya despite Italian calls for a cessation, saying more civilians would die if operations were not maintained under a UN mandate to protect Libyans from the exactions of Kadhafi's regime.
"Nato will continue this mission because if we stop, countless more civilians could lose their lives," Nato chief Anders Fogh Rasmussen said in a video statement on the alliance's website.
He did not directly refer to Italy, whose Foreign Minister Franco Frattini on Wednesday called for "an immediate humanitarian suspension of hostilities" in Libya.
Rebel colonel Ahmed Omar Bani on Thursday made a plea for foreign allies to provide the arms, training and communications systems needed to defeat Kadhafi.
"It is so urgent" he said, "we will fight, just support us, just give us the equipment."
Much of the rebels' arsenal comprises Soviet-era tanks and artillery up to 50 years old.
Meanwhile, a ship carrying 49 people fleeing the conflict arrived at the Tunisian port of El Ketef, including 19 defecting police and soldiers, the TAP news agency said.
The developed countries took the near unprecedented step on Thursday of drawing down their oil reserves to make good the loss of Libyan supply, aiming to keep prices in check.
The International Energy Agency said that 60 million barrels would be taken from reserves over the next month to cover lost Libyan output, only the third time the 28-member group has taken such a step.
The announcement sent the price of crude plummeting ê4.39, or 4.6 percent, on Thursday in New York.
However, prices rebounded in Asian trade Friday, with New York's main contract, West Texas Intermediate for delivery in August, rising 92 cents to ê91.94 a barrel in morning trade.